Your Home Equity Profile
Home Equity Breakdown
Available Credit
$0
Payment Overview
Draw Period Payment
$0
First 10 years
Repayment Period Payment
$0
Years 11-30
Equity Breakdown
Total Cost Analysis
HELOC vs Home Equity Loan: Which is Right for You?
Use this calculator to determine how much equity you can access via a HELOC or home equity loan. This calculator uses the standard HELOC structure with interest-only payments during the draw period and principal + interest payments during the repayment period. Perfect for planning renovations, debt consolidation, or real estate investments like BRRRR strategies.
Calculate Your HELOC Payments and Available Credit
This HELOC calculator helps you determine how much equity you can access, what your payments will be during the draw period, and how much your payment will increase during the repayment period.
Get started: Enter your home value, existing mortgage balance, and desired draw amount to see a complete analysis.
Step-by-Step Guide: How to Use This Calculator
- Home Value ($): Enter your current home's market value. Use recent sold comps from Zillow, Redfin, or your latest property tax assessment. This is the foundation for calculating available equity.
- Existing Mortgage Balance ($): Input your current first mortgage balance from your latest statement. If you have no mortgage, enter $0. The calculator subtracts this from your maximum borrowing capacity.
- Max CLTV (%): Set the Combined Loan-to-Value ratio your lender allows. Most lenders offer 80-85% for primary residences, 75-80% for condos, and 70-75% for investment properties. Higher credit scores (740+) typically qualify for higher CLTVs.
- Draw Amount ($): Enter how much you plan to borrow. The calculator will show your available credit and alert you if your draw exceeds it. Common amounts: $50k-$100k for major renovations, $20k-$50k for debt consolidation, $30k-$75k for investment property down payments.
- Interest Rate (%): Enter your expected APR. As of late 2025, rates range from 8.00-10.00% depending on credit score, CLTV, and lender. Check with local banks, credit unions, and online lenders for current quotes. Tip: Credit unions often beat big banks by 0.5-1%.
- Draw Period (years): Set how long you can borrow and make interest-only payments. Standard is 10 years. Some lenders offer 5, 7, or 15-year draw periods.
- Repayment Period (years): Set how long you'll repay the balance after the draw period ends. Standard is 20 years. Total loan term = Draw Period + Repayment Period (e.g., 10 + 20 = 30 years).
- Calculate: Click the button to see your available credit, draw-period payment (interest-only), repayment-period payment (principal + interest), total interest cost, and home equity breakdown chart.
- Share Your Results: Use the Share button to generate a unique URL encoding your inputs. Send it to your lender, financial advisor, or spouse to review the same assumptions.
💡 Pro Tip: Run multiple scenarios by adjusting draw amount and interest rate to see how different choices affect your monthly payment and total cost. A 1% rate difference on a $75k HELOC costs you $19,500 more over 30 years.
HELOCs are commonly used for home renovations, debt consolidation, and real estate investment strategies like BRRRR (Buy, Rehab, Rent, Refinance, Repeat).
Understanding HELOCs: The Basics
A Home Equity Line of Credit (HELOC) is a revolving line of credit secured by your home equity. Unlike a traditional loan where you receive a lump sum, a HELOC works like a credit card, you can draw funds as needed up to your credit limit during the draw period.
How HELOCs Work
HELOCs typically have two phases:
- Draw Period (5-10 years): You can borrow and repay funds repeatedly. Most HELOCs require only interest payments during this phase, keeping monthly costs low.
- Repayment Period (10-20 years): Once the draw period ends, you can no longer borrow. Your outstanding balance is amortized over the repayment period with principal + interest payments.
HELOC vs Home Equity Loan
| Feature | HELOC | Home Equity Loan |
|---|---|---|
| Structure | Revolving credit line | Lump sum loan |
| Interest Rate | Variable (adjusts monthly) | Fixed (typically) |
| Payments | Interest-only, then P+I | Fixed P+I from day one |
| Best For | Ongoing projects, flexibility | One-time expenses, predictability |
| Closing Costs | Often $0-$500 | 2-5% of loan amount |
Current HELOC Rates (2025)
As of early 2025, HELOC rates typically range from 7.5% to 11% APR, depending on:
- Your credit score (740+ gets best rates)
- CLTV ratio (lower CLTV = lower rate)
- Lender and market conditions
- Prime rate (HELOCs usually = Prime + margin)
Most HELOCs are tied to the prime rate and adjust monthly. If the Federal Reserve changes rates, your HELOC payment changes accordingly.
Common Uses for HELOCs
1. Home Renovations & Repairs
The most popular use. HELOC interest may be tax-deductible if used for home improvements (consult tax advisor). Draw funds as needed throughout the project instead of taking a lump sum upfront.
Example: $75K kitchen remodel paid in phases, you only pay interest on the amount drawn so far, not the full credit line.
2. Debt Consolidation
Replace high-interest credit cards (18-24% APR) with a lower-rate HELOC (8-10% APR). Can save thousands in interest, but you're now using your home as collateral.
Warning: If you default on a HELOC, you risk foreclosure. Only consolidate debt if you're committed to not running up new credit card balances.
3. Real Estate Investment (BRRRR Strategy)
Many real estate investors use HELOCs to fund down payments on rental properties or fix-and-flip deals:
- Buy: Use HELOC for 20-25% down payment
- Rehab: Draw additional funds for renovations
- Rent: Property generates cash flow to cover HELOC payments
- Refinance: After 6-12 months, refinance at 75-80% LTV, pull out invested capital
- Repeat: Pay down HELOC with refinance proceeds, repeat with next property
This strategy works best in appreciating markets with strong rental demand. Check our Fix and Flip Calculator and Long-Term Rental ROI Calculator to model deals.
4. Emergency Fund / Financial Flexibility
Some homeowners open a HELOC as a backup emergency fund. If you never draw on it, you pay nothing (or minimal annual fees). It's there if needed for medical bills, job loss, or unexpected expenses.
5. Education Expenses
HELOCs typically have lower rates than private student loans (8-12% vs 10-15%). However, you're putting your home at risk if you can't repay, whereas student loans can often be deferred or put on income-driven plans.
How Much Can You Borrow? Understanding CLTV Limits
Combined Loan-to-Value (CLTV) is the key metric lenders use to determine your maximum HELOC limit:
CLTV = (First Mortgage Balance + HELOC Balance) / Home Value
Typical CLTV Limits by Lender Type
- 80% CLTV (Most Common): Traditional banks and credit unions
- 85% CLTV: Some banks for well-qualified borrowers (740+ credit)
- 90% CLTV: Online lenders, higher rates and fees
- 95% CLTV: Rare, requires exceptional credit and low DTI
CLTV Calculation Example
Scenario: Home worth $500,000, mortgage balance $300,000, lender allows 80% CLTV
- Max total debt: $500,000 × 0.80 = $400,000
- Existing mortgage: $300,000
- Available HELOC credit: $400,000 - $300,000 = $100,000
If you have $200,000 in equity but an 80% CLTV cap, you can only borrow $100,000, not the full $200,000.
Factors That Affect Your CLTV Limit
- Credit Score: 740+ qualifies for best terms; below 680 may not qualify at all
- Debt-to-Income (DTI): Most lenders want DTI under 43% including HELOC payment
- Payment History: Late payments on mortgage or other debts reduce your limit
- Income Stability: W-2 employment is easiest; self-employed may need 2 years tax returns
- Home Appraisal: Lender will order appraisal; if value comes in lower than expected, your limit drops
HELOC Payment Shock: What Happens When Draw Period Ends
One of the biggest risks with HELOCs is payment shock, the sudden increase in monthly payments when you transition from draw period to repayment period.
Example: $50,000 HELOC at 8.5% APR
Draw Period (Years 1-10): Interest-Only Payments
- Monthly Payment: $354
- This is ONLY interest; balance stays at $50,000
Repayment Period (Years 11-30): Principal + Interest
- Monthly Payment: $389
- Balance now amortizes over remaining 20 years
- Payment increases 10% compared to draw period
If rates rise during draw period: Payment shock can be much worse. If rates increase from 8.5% to 10.5% by year 10, your repayment payment could jump to $480/month (35% increase).
How to Avoid Payment Shock
- Pay down principal during draw period: Even small extra payments reduce the balance you'll carry into repayment
- Lock in a fixed-rate option: Some lenders let you convert all or part of your balance to a fixed rate
- Refinance before repayment starts: If rates are favorable, refinance into a fixed-rate home equity loan or cash-out refinance
- Budget for worst case: Model payments at current rate + 2-3% to stress-test affordability
HELOC Calculator FAQs
How do I calculate HELOC payments?
Calculate HELOC payments in two phases: Draw Period: Interest-Only Payment = (Outstanding Balance × APR) ÷ 12. Repayment Period: Use standard amortization formula for principal + interest. This HELOC payment calculator shows both phases automatically. For example, a $50,000 HELOC at 8% = $333/month interest-only, then ~$418/month during 20-year repayment.
What is a HELOC draw period?
The HELOC draw period is typically 5-10 years when you can borrow from your credit line and make interest-only payments. During this phase, you only pay interest on the amount you've borrowed, not the full credit limit. You can borrow, repay, and re-borrow multiple times. Use this draw period calculator to see how interest-only payments work and plan for the transition to repayment.
How does the HELOC repayment period work?
The HELOC repayment period (typically 10-20 years) begins after the draw period ends. You can no longer borrow, and your outstanding balance is amortized with principal + interest payments. This repayment calculator shows the payment increase from draw to repayment period. Payments often double or triple, so budget accordingly for this "payment shock."
What is interest-only payment on a HELOC?
An interest-only payment during the HELOC draw period means you only pay interest on your borrowed amount, not principal. Formula: Monthly Payment = (Balance × APR) ÷ 12. Use this interest-only payment calculator to see how much you'll pay monthly. While lower than traditional loans, interest-only payments don't reduce your balance, so you'll owe the full amount when the repayment period begins.
What is a HELOC and how does it work?
A HELOC is a revolving line of credit secured by your home equity. You can borrow, repay, and re-borrow during the draw period (typically 10 years) with interest-only payments. After the draw period ends, you enter a repayment period (typically 20 years) where you pay principal + interest to pay off the balance.
What is the difference between a HELOC and a home equity loan?
A HELOC is a revolving credit line with variable rates and interest-only payments during the draw period. A home equity loan is a lump sum with a fixed rate and fixed monthly payments from day one. HELOCs offer flexibility; home equity loans offer predictability.
How much can I borrow with a HELOC?
Most lenders allow up to 80-85% CLTV (combined loan-to-value). Formula: (Home Value × Max CLTV%) - Existing Mortgage Balance = Available Credit. For example, a $500K home with $300K mortgage at 80% CLTV = $100K available credit.
What are typical HELOC rates in 2025?
HELOC rates in 2025 range from 7.5% to 11% APR depending on credit score, CLTV, and lender. Rates are variable and typically tied to the prime rate, adjusting monthly as the Fed changes rates.
Is HELOC interest tax-deductible?
HELOC interest is tax-deductible if you use the funds to buy, build, or substantially improve your home. Interest on HELOCs used for debt consolidation, tuition, or other purposes is NOT deductible under current tax law. Consult a tax professional for your situation.
What happens if I can't make HELOC payments?
HELOCs are secured by your home. If you default, the lender can foreclose, even if your first mortgage is current. Communicate with your lender immediately if you're struggling; they may offer forbearance or modification options.
Can I pay off my HELOC early?
Yes, most HELOCs have no prepayment penalty. You can pay down the balance anytime during the draw or repayment period. Some lenders charge an early closure fee if you close the line within 2-3 years of opening.
What is HELOC payment shock?
Payment shock occurs when your HELOC transitions from draw period (interest-only) to repayment period (principal + interest). Payments can increase 50-100% or more, especially if rates have risen. Budget for this increase or pay down principal during the draw period.
Should I use a HELOC for real estate investing?
HELOCs are popular for BRRRR strategies and flip funding because they offer low-cost, flexible access to capital. However, you're putting your primary residence at risk. Only use a HELOC for investing if the property will generate positive cash flow or you have reserves to cover payments if deals go wrong.
How do I share my HELOC calculation?
Click the Share button to generate a unique URL encoding your inputs. You can copy the link, share via social media, or send it to your financial advisor or lender so everyone reviews the same assumptions.
Important Legal & Financial Notice
🔍 Educational Tool Only
This HELOC calculator is provided for educational and informational purposes only. It is not a loan offer, commitment to lend, or financial advice from any lending institution.
📊 Rate & Term Variability
Actual rates, terms, CLTV limits, fees, and qualification requirements vary significantly by lender, credit profile, property type, location, and market conditions. The calculations shown assume constant interest rates, but HELOCs typically have variable rates that can increase your payment substantially.
⚠️ Foreclosure Risk
HELOCs and home equity loans are secured by your home. Failure to make required payments can result in foreclosure and loss of your property, even if your first mortgage is current.
👨⚖️ Professional Consultation Required
Always consult with licensed mortgage professionals, tax advisors, and legal counsel before opening a HELOC or home equity loan. They can provide guidance specific to your financial situation, tax implications, and local regulations.
📈 Market Conditions
Interest rates, home values, and lending standards change over time. Results from this calculator may not reflect current market conditions or your specific qualification criteria.