HELOC Calculator

During the draw period the payment is interest-only — balance × monthly rate — so principal barely moves. When repayment begins, the outstanding balance is amortised over the repayment term at the (variable) rate, producing a much higher payment. The credit limit is home value × CLTV cap − first-mortgage balance.

Two phases, and the shock between them

A HELOC is not one loan but two stages of one. During the draw period — usually ten years — it works like a credit card secured by your home: you borrow what you need up to a limit, and your minimum payment is interest only. That keeps payments low and flexible, but it also means the balance does not fall; you are paying to rent the money, not to repay it. When the draw period ends, the HELOC flips into the repayment period, and the outstanding balance is amortised over the remaining term. Suddenly you are paying principal and interest, and the payment can leap — often by half or more. This jump is the payment shock, and it is the single most important thing to understand before opening a HELOC.

This calculator shows both payments side by side — the interest-only draw payment and the first repayment payment — and the shock between them. Borrowers who budget only for the comfortable draw-period payment are the ones who get into trouble when it resets; seeing the repayment figure up front is the point.

Worked example — a $500,000 home with a $250,000 mortgage, drawing $75,000 at 7.5% (10-year draw, 20-year repayment): During the draw period the payment is interest only: about $469 a month. When repayment starts, the $75,000 amortises over 20 years — about $604 a month, a $135 jump. If the rate climbs to its cap, that repayment payment is over $850.

Variable rates — the second risk

A HELOC’s rate is variable, usually tied to the prime rate, so it moves with the market throughout both phases. That compounds the payment-shock risk: not only does the payment jump at repayment, but the rate it jumps to may be higher than today’s. Because no one can predict rates, this calculator models scenarios rather than a single guess — flat, rising, and a worst case where the rate climbs to its lifetime cap. Whatever you choose, it always shows the worst-case total interest and repayment payment too, so the risk is never hidden behind an optimistic assumption.

The gap between the flat and worst-case figures is the variable-rate risk you are taking on. If the worst-case repayment payment is one you could not afford, a fixed-rate home equity loan — predictable from day one — may suit you better. Compare the two before deciding.

The credit limit, and softening the shock

How large a line you can open is set by the combined loan-to-value cap: the home’s value times the cap (usually 80–85%), minus your first-mortgage balance. The calculator computes that limit and shows how much remains available after what you draw — the revolving headroom you can tap later. You pay interest only on what you actually draw, not the whole limit, which is what makes a HELOC flexible for irregular needs like a phased renovation.

You can also soften the shock yourself. Because a HELOC is revolving, you are free to pay down principal during the draw period even though you are not required to. Enter an amount under the advanced options and watch the repayment payment fall — pay enough and the shock disappears entirely, because there is less balance left to amortise. The two-phase table and the payment chart make the whole arc visible: flat and low through the draw, then the step up into repayment.