HELOC Calculator

What this calculator is, and when to reach for it

A home equity line of credit is a credit card secured against your house. That comparison is unkind but accurate, and holding it in mind explains almost everything about how the product behaves: a limit you can draw against repeatedly, interest charged only on what you have used, a variable rate, and a minimum payment that can be small enough to make the balance feel harmless.

What distinguishes it from a card is the security and the structure. Because the property backs it, the rate is a fraction of unsecured credit. And because it runs in two distinct phases, the payment you make in year three bears no relation to the payment you will make in year twelve.

That two-phase structure is the single most important thing to understand. During the draw period you can borrow, repay, and borrow again, and many lenders require interest only. When it ends, the line closes and the repayment period begins, during which the balance must be cleared over a fixed span. The payment jump between the two is frequently severe and almost always underestimated.

Reach for this page when you are deciding how much of a line to request, when you want to see what a planned draw would cost in each phase, or when a draw period is approaching its end and you need to know what is coming.

When a line is the right shape, and when it is not

It suits needs that are uncertain in amount or spread over time: a renovation running in stages, a business with lumpy cash requirements, or a reserve held against a specific risk. You pay for what you use, and an undrawn line costs little or nothing.

It suits fixed, known, one-off costs far less well. If you need a specific sum today and will repay it over a decade, a home equity loan gives you a fixed rate and a fixed payment, and removes both the variable-rate risk and the temptation to draw again.

The temptation is not a trivial consideration. A line that is repaid and then redrawn keeps the debt alive indefinitely, and because the security is your home, an indefinitely alive debt is a materially different thing from a revolving card balance.

Where to go next

To see how much line you could realistically be offered, use the home equity calculator and the combined loan to value calculator, since lenders cap the total of all secured borrowing rather than the line alone.

For the fixed-rate alternative, the home equity loan calculator models a lump sum on a set schedule. For the third route, replacing the mortgage entirely, the cash-out refinance calculator shows what that costs.

Because a line is interest-only during the draw phase, the interest-only mortgage calculator illustrates the same two-phase payment shock in a mortgage context. If the purpose is clearing unsecured debt, price the alternatives first with the debt consolidation calculator.

How the line and its two phases are worked out

Three separate calculations: how large a line you qualify for, what you pay while drawing, and what you pay once repayment begins.

line = (value × cap) − first mortgage  |  draw payment = drawn × r  |  repay payment = amortize(drawn, r, k)

cap

the lender’s maximum share of value across all secured borrowing

drawn

the balance actually taken, not the limit available

r

the periodic rate, which on a line can move over time

k

the number of payments in the repayment period

Why interest-only payments are so misleading

During the draw period, an interest-only payment covers exactly the interest accrued and nothing else. The balance does not fall by a single unit no matter how many years of payments you make, which is a fundamentally different experience from every amortizing loan.

It makes borrowing feel inexpensive at precisely the moment you are deciding how much to borrow. A balance whose monthly cost is modest invites a larger draw, and the consequence arrives years later when that same balance has to be repaid over a compressed schedule.

The payment shock, quantified

When the draw period ends, the balance must clear over the repayment period, which is typically shorter than a mortgage term. The payment therefore has to cover principal as well as interest, compressed into fewer years.

The jump is routinely 40% or more, and can be far larger where the repayment period is short. Anyone holding a line should know their own figure well before the transition rather than discovering it on a statement.

The rate moves, and it moves on everything

Most lines carry variable rates tied to a published index. A rise increases the interest-only payment immediately and proportionally, and it increases the repayment-phase payment too. There is no fixed period insulating you.

This calculator holds one rate steady so the two phases stay comparable, which is the only way to make the structure legible. Treat every projection as an illustration under an assumption, and stress-test it by running a higher rate.

Limit, drawn balance, and what a lender counts

Only the drawn balance is debt, and only it accrues interest. An undrawn line costs nothing beyond any annual fee. But when you apply for other borrowing, many lenders count the full limit against you on the basis that you could draw it tomorrow.

That asymmetry catches people at exactly the wrong moment. A large untouched line can reduce what a mortgage lender will offer, so if a property purchase is close, it is worth knowing whether your line will be assessed on its balance or its limit.

What this page assumes

The calculator takes your existing mortgage balance off the share of property value you said a lender allows, then works out interest-only payments during the draw period and repaying payments afterwards.

Real lines usually carry a variable rate. One steady rate is used here so the two periods stay comparable.

Worked examples, step by step

Take a property valued at 450,000 with a first mortgage of 296,716.44, a lender cap of 85%, a rate of 8.5%, a ten-year draw period, and a fifteen-year repayment period.

The line, and what a 50,000 draw costs in each phase

A 50,000 draw costs 354.17 a month during the draw period, which is genuinely cheap for that sum. But the balance stays at 50,000 for the entire decade — ten years of payments totalling roughly 42,500, with nothing at all repaid.

When repayment begins, the payment rises to 492.37, an increase of 39%. That is the milder version of this transition, because a fifteen-year repayment period is comparatively generous. A ten-year repayment period would push the payment to around 620, a jump of three quarters.

What ten years of interest-only actually costs

Across the draw period the borrower pays about 42,500 in interest and still owes the full 50,000. Over the subsequent fifteen years they pay roughly 88,600 more, of which 38,600 is further interest.

So 50,000 borrowed costs approximately 81,100 in interest across twenty-five years — more than the sum drawn. None of that is hidden, but the interest-only phase makes it easy not to notice, because the monthly figure never signals what is accumulating.

Paying principal during the draw period

Nothing stops you paying more than the interest-only minimum, and doing so changes the outcome entirely. Paying 700 a month from the outset — rather than 354.17 — would clear the 50,000 well within the draw period and avoid the transition altogether.

This is the practical answer to the payment shock. Treat the interest-only minimum as the floor rather than the plan, and the line behaves like an ordinary loan with unusually good flexibility.

The vocabulary, on and around this page

Home equity line of credit

A revolving facility secured on your property, allowing repeated draws up to a limit with interest charged only on the balance used.

Draw period

The phase during which you can borrow against the line, commonly ten years, often with interest-only payments required.

Repayment period

The phase after the draw period ends, during which the balance must be cleared over a fixed span. No further borrowing is possible.

Payment shock

The jump in payment at the transition between phases, as principal repayment is added and compressed into fewer years.

Interest-only payment

A payment covering only accrued interest, leaving the balance completely unchanged however long it is paid.

Credit limit

The maximum you may draw. It costs nothing unused, but other lenders may count it in full when assessing new borrowing.

Drawn balance

The amount actually borrowed. Only this accrues interest and only this is debt for the purposes of your own position.

Combined loan to value

All secured borrowing as a share of property value. It is what determines the size of line a lender will offer.

Lender cap

The maximum combined ratio permitted, commonly 80% to 85%. Applied to value and reduced by the first mortgage to give the line.

Variable rate

A rate tied to a published index that can move. It affects both the draw-phase and repayment-phase payments immediately.

Index

The published benchmark a variable rate follows, with the lender adding a margin on top.

Margin

The fixed percentage a lender adds to the index. It does not change even when the index does.

Rate cap

A ceiling on how high the rate may go over the life of the line. Worth knowing, since it defines the worst case.

Second charge

The ranking of the line behind the first mortgage. It is why the rate is higher than a first-charge mortgage.

Home equity loan

The fixed-rate lump-sum alternative. Better suited to a known, one-off cost repaid on a set schedule.

Annual fee

A recurring charge some lenders apply for maintaining the facility, payable whether or not you draw.

Freeze or reduction

A lender’s right to suspend or cut an undrawn line, typically if property values fall or your circumstances change.

Amortization

The repayment schedule applied during the repayment period, converting the balance into equal payments over the remaining span.

Revolving credit

Borrowing where the limit is restored as you repay. It has no natural end date, which is what keeps a line alive indefinitely.

Reserve line

A line opened and left undrawn as contingency. Cheap to hold, though it may still count against other borrowing.

Common mistakes, and what this page will not do

• Treating the interest-only payment as the cost of borrowing. It covers interest and nothing else. In the example, ten years of payments totalled about 42,500 while the balance stayed at 50,000.
• Not knowing your repayment-phase payment. The example rises 39% at the transition, and a shorter repayment period would push it up by three quarters.
• Borrowing more because the payment feels small. Interest-only payments make large draws feel affordable at exactly the moment you are deciding how much to take.
• Assuming the rate will hold. Most lines are variable with no fixed period, so a rise increases both phases immediately. Stress-test at a higher rate.
• Using a line for a fixed, known, one-off cost. A home equity loan gives a fixed rate and a set schedule, removing both the rate risk and the temptation to redraw.
• Redrawing repeatedly. A line that is repaid and drawn again keeps the debt alive indefinitely, and the security behind it is your home.
• Forgetting the limit may count against other borrowing. Many lenders assess the full limit rather than the drawn balance, so a large untouched line can reduce a mortgage offer.
• Assuming the line cannot be withdrawn. Lenders commonly reserve the right to freeze or reduce an undrawn facility if values fall or circumstances change.
• Confusing the limit with equity. The line is capped by combined loan to value, so it is always considerably less than the equity you hold.

What this calculator leaves out: This calculator holds one rate steady so both phases stay comparable, and real lines are usually variable. It does not model rate movements or caps, annual or draw fees, lender-specific draw and repayment structures, minimum draw requirements, or the right to freeze a facility. It applies the cap, rate, and periods you enter.

Frequently asked questions