HELOC Calculator

The CFPB describes the usual method: a lender takes a percentage of the appraised value of the home and subtracts the balance owed on the existing mortgage. Its booklet works the example at 75%: a $100,000 home gives $75,000, less $40,000 still owed, for a potential line of $35,000. The percentage is the lender’s choice, so change the combined loan-to-value field to match the offer in front of you. The figure that comes out is a ceiling based on equity alone; the lender will also look at your income, debts and credit history before setting an actual limit.

Because the two phases charge for different things. During the draw period many plans ask only for the interest, which the CFPB puts plainly: you "pay nothing toward the principal". Every dollar you borrowed is still outstanding on the last day of the draw. When the repayment period begins, that whole balance has to be amortized over the remaining years, so the payment now covers interest plus principal. On the default scenario above the payment rises from $354.17 to $433.91 even with the rate unchanged — and the increase is far larger when the repayment period is shorter than the draw period.

HELOC rates are typically variable and tied to a published index plus a margin, so both the payment during the draw and the payment after it can move. The CFPB booklet shows the effect directly: $10,000 drawn at 10% costs $83 a month interest-only, and at 15% it costs $125. Federal law requires a variable-rate plan secured by a dwelling to carry a lifetime ceiling on the rate. Set the repayment-period rate above the draw rate here to see what that combination does to the payment you are left holding.

Yes, and it is a real risk rather than a footnote. The CFPB warns that some plans require the entire balance at once when the draw period ends, "which might be a large amount called a balloon payment", and that failing to make it can cost you the home. Regulation Z requires a creditor to disclose the possibility up front. This calculator models the other structure — a fixed repayment period — so if your plan balloons, the amount due is simply the balance shown as carrying into repayment.

It costs you the whole balance, deferred. Interest-only payments keep the debt at full size for the entire draw period, so you pay interest on the maximum balance for years and still owe every dollar at the end. In the default scenario the draw period alone costs $42,500.40 in interest and reduces the debt by nothing. Paying principal during the draw shrinks both the interest and the payment you inherit — check first whether your plan charges a fee for doing so.

A home equity loan hands you a fixed amount at a fixed rate and amortizes from day one, so the payment never changes and the balance falls from the first month. A HELOC is revolving credit: you borrow, repay and borrow again during the draw period, usually at a variable rate, and only then move into a repayment schedule. The trade is flexibility against predictability, and the payment shock modelled here is the price of that flexibility.

Fees and taxes. Application and appraisal fees, points, annual maintenance and inactivity fees, transaction fees, early-termination charges and closing costs all exist and none of them appear in these figures, so the totals here are interest and principal only. It also models a single draw held flat through the draw period rather than a revolving balance, assumes each rate holds steady within its phase, and ignores any tax treatment of the interest.