A home equity line of credit — a HELOC — turns the equity sitting in your house into a credit line you can draw from, repay, and draw from again, much like a credit card with your home standing behind it. It is not a lump-sum loan, and that difference shapes everything about how it behaves. Take the example this calculator opens with: a $450,000 home with $260,000 still owed on the mortgage. You have $190,000 of equity, but no lender will let you borrow all of it — at a typical 85 percent combined loan-to-value cap, the largest line you can open is $122,500. And the payment story comes in two very different halves: $354.17 a month while you are drawing on a $50,000 balance, then $433.91 a month once repayment begins. Most HELOC surprises live in the gap between those two numbers, so this page walks through both.

What a HELOC actually is.

A HELOC is a revolving, secured credit line. Secured means the debt is backed by your home: the HELOC sits as a second lien behind your first mortgage, and the house is the collateral. Revolving means the money works like a pool rather than a payout. During the draw period you borrow what you need, when you need it — by transfer, check, or a card the lender issues — and as you repay principal, that room opens up again for new draws. Interest is charged only on the balance you have actually drawn, not on the full approved limit, which is why HELOCs are popular for projects whose costs arrive in stages. If you never draw, you owe nothing but possibly a small annual fee. The catch is built into the same design: the line is not a loan with one fixed story, but two loans wearing one name.

How the lender sizes your line.

Three numbers decide your limit: your home's value, what you still owe, and the lender's combined loan-to-value cap, usually shortened to CLTV. The lender multiplies your home's value by the cap, then subtracts your existing mortgage balance. On this page's example: $450,000 times 85 percent is $382,500, and $382,500 minus the $260,000 mortgage leaves a maximum credit line of $122,500. Notice the gap between that and your $190,000 of equity — the cap exists so a cushion of equity stays in the home. Most lenders set the cap between 80 and 85 percent, with a few going to 90 percent for borrowers with strong credit. Your combined loan-to-value with a $50,000 draw works out to 68.89 percent: the $260,000 mortgage plus the $50,000 line, divided by the $450,000 value. The limit is only half the approval story, though — lenders also weigh your credit score, income, and debt-to-income ratio, which is why the same house can qualify at one bank and stall at another.

Phase one: the draw period.

The draw period is the honeymoon, and it is priced to feel like one. It commonly runs ten years, and during it your required monthly payment is usually interest only. On a $50,000 balance at 8.5 percent, that is $354.17 a month — $50,000 times 8.5 percent, divided by twelve. The payment feels light because it is buying nothing: after ten years of on-time interest-only payments, you have sent the lender $42,500 and you still owe exactly $50,000. Nothing in the rules stops you from paying principal during the draw period, and every dollar you do pay down is a dollar you can draw again later. But the minimum payment will never push you to do it. Borrowers who treat the interest-only figure as 'the payment' are setting themselves up for the second phase, which arrives on a date printed in the loan documents whether the project is finished or not.

Phase two: repayment, and the payment jump.

When the draw period ends, the line closes to new borrowing and the balance converts into a plain amortizing loan, most often over twenty years. The same $50,000 at the same 8.5 percent now costs $433.91 a month, because each payment must retire principal as well as interest. Over those twenty years you will pay $54,138.79 of interest on top of the $50,000 itself. The jump from $354.17 to $433.91 — about $80 more a month — is manageable on a partial draw. Run the full-draw version to see the real cliff: borrow the entire $122,500 maximum and the interest-only payment is $867.71 a month, but the repayment payment becomes $1,063.08, and it stays there for twenty years. Lenders call this payment shock, and it is the single most common way HELOC borrowers get into trouble. The defense is boring and effective: before you draw, check that the repayment payment — not the draw payment — fits your budget with room to spare.

The worked example, added up honestly.

Stitch the two phases together on the standard example and the true price of a HELOC appears. Draw $50,000 on day one, hold it for the full ten-year draw period, then repay over twenty years, all at a constant 8.5 percent. Interest during the draw period: $42,500. Interest during repayment: $54,138.79. Total interest: $96,638.79 — very nearly twice the amount borrowed — and a total cost of $146,638.79 for the use of $50,000. Those are this calculator's exact outputs, and they rest on assumptions worth naming: one full draw at the start, no extra draws, no voluntary principal payments, and a rate that never moves. Real life improves on the first three if you repay aggressively as you go. The fourth assumption — the constant rate — real life usually makes worse, which brings up the risks below.

HELOC versus home equity loan versus cash-out refinance.

All three products tap the same equity, and the right choice depends on how your spending is shaped. A home equity loan hands you one lump sum at a fixed rate and amortizes from the first month: the same $50,000 at 8.5 percent fixed over fifteen years costs $492.37 a month and $38,626.56 of total interest. The payment is higher than a HELOC's draw payment from day one, but it never jumps, never re-prices, and the debt is gone in fifteen years — for a single known expense, like a roof, it is often the cheaper and safer tool. A cash-out refinance goes further, replacing your first mortgage with a larger one and paying you the difference. It earns serious consideration only when the new first-mortgage rate beats your current one, because you pay closing costs on the entire new balance and restart the mortgage clock. The HELOC's home turf is spending that is staged or uncertain — a renovation in phases, a year of irregular expenses — where paying interest only on what you have actually drawn beats borrowing the whole sum up front.

The two risks printed in small type.

First, the rate moves. Nearly every HELOC carries a variable rate built from the prime rate plus a lender margin, and it can re-price as often as monthly. This calculator holds your APR constant because no tool can forecast the prime rate, but you should stress-test it yourself: if the rate on a $50,000 balance climbs two points, from 8.5 to 10.5 percent, the interest-only payment rises from $354.17 to $437.50 — and the repayment payment climbs with it. Second, this is secured debt. A credit card you cannot pay is a credit-score problem; a HELOC you cannot pay is a foreclosure risk, because the home guarantees the line. Lenders can also freeze or shrink your unused credit when home values fall, exactly when you might be counting on it. None of this makes a HELOC a bad product. It makes it a product to size conservatively, with the unused portion treated as insurance rather than income.

How to use this calculator well.

Enter a realistic value for your home — the price it would sell for, not the number that produces the answer you want — and the mortgage balance from your most recent statement. Set the combined LTV cap to the figure your lender actually quoted, since the 85 percent default is common but not universal. Enter the amount you genuinely plan to draw, and the APR from a real offer; HELOC rates are quoted as prime plus a margin, so use today's combined figure. Then read the results in this order: maximum credit line, combined loan-to-value, draw payment, repayment payment. Finally, run the two stress cases lenders will not volunteer: your full maximum line instead of your planned draw, and your APR two points higher. If the repayment payment still fits on the worst of those runs, the line is sized to your life. If it only fits on the friendliest one, borrow less — or price the home equity loan instead, and check the combined payment against your debt-to-income ratio before you apply anywhere.

A second worked example, on a larger home.

Take a $600,000 home with a $300,000 mortgage still owed, an 80 percent combined loan-to-value cap, and a $100,000 line drawn at 9 percent. The maximum line this equity supports is $180,000: $600,000 times 80 percent is $480,000, minus the $300,000 mortgage. Drawing $100,000 of it puts combined debt at $400,000, for a combined loan-to-value of 66.67 percent, comfortably inside the cap. The interest-only draw payment on $100,000 at 9 percent is $750 a month. Held for the full ten-year draw period, that interest totals $90,000, and the balance is still $100,000 at the end of it. Repaid over fifteen years at the same 9 percent, the payment becomes $1,014.27 a month, with $82,567.99 of interest across the repayment period. Add the two phases and the total interest is $172,567.99 for the use of $100,000. Compare that with the standard example on this page, where $50,000 cost $96,638.79 of interest across thirty years, and the lesson sharpens: a HELOC's total cost is dominated by how long the balance sits untouched, and a larger draw at a higher rate over a shorter repayment term still produces an interest bill larger than the amount borrowed.

A third worked example, on a smaller line.

Take a $300,000 home with a $150,000 mortgage, an 85 percent cap, and a $30,000 line drawn at 7.75 percent. The maximum line is $105,000: $300,000 times 85 percent is $255,000, minus the $150,000 mortgage. Drawing $30,000 puts combined debt at $180,000, for a combined loan-to-value of exactly 60.00 percent. The interest-only draw payment is $193.75 a month, and ten years of it totals $23,250 with the $30,000 still owed. Repaid over twenty years at 7.75 percent, the payment is $246.28 a month, with $29,108.30 of interest across repayment. Total interest is $52,358.30 for the use of $30,000. The smaller line is not a smaller story: the interest still exceeds the amount borrowed when the balance is held for the full draw period and then repaid slowly. The only ways to beat that arithmetic are to borrow less, to pay principal during the draw period, or to repay over a shorter term, and this calculator lets you test all three before you sign anything.

Paying principal during the draw period, in dollars.

The draw period minimum is interest only, but nothing stops you from paying principal, and the dollars reward it plainly. Go back to the standard example: a $50,000 balance at 8.5 percent, interest-only at $354.17 a month. Add $100 a month of principal for the full ten-year draw period and you retire $12,000 of principal, leaving a $38,000 balance when repayment begins. At the same 8.5 percent over twenty years, the repayment payment on $38,000 is $329.77 a month, instead of $433.91 on the full $50,000, and the repayment interest falls to $41,145.48. That $100 a month also reopens $12,000 of room on the line, which is the part to handle with discipline: redrawn room is not free money, it is the same debt returning. Used as a one-way tool, extra principal during the draw period is the cheapest payment-shock insurance a HELOC borrower can buy, because it attacks the balance that the repayment payment will be calculated on.

The tax question, and the fees the calculator does not show.

Interest on a HELOC is not automatically tax-deductible. Under current United States tax rules, the interest generally counts as deductible home mortgage interest only when the borrowed money is used to buy, build, or substantially improve the home that secures the loan, and the usual limits on total mortgage debt apply. Interest on a HELOC used for a vacation, a car, or paying off credit cards generally does not qualify, whatever the lender's marketing suggests. Check your own situation with a tax professional before counting any deduction in your budget, and never let a possible deduction justify a larger draw. Separately, this calculator shows payments and interest, not the fees that often surround a HELOC: an annual fee, an appraisal or valuation charge, a fee for each draw in some agreements, and an early-closure fee if you close the line within a few years of opening it. Those fees are real costs even though they never appear in the payment figures here, so ask for the full fee schedule in writing and add it to the total cost before comparing a HELOC with a home equity loan, whose closing costs are usually itemized more plainly.

Qualifying, and why the same house gets different answers.

The maximum line is only half the approval story, and the other half is where identical houses diverge. Lenders weigh your credit score, your income, and your debt-to-income ratio, which is the share of your monthly income already committed to debt payments, and they verify the home's value with an appraisal or valuation that may come in below your estimate. A borrower whose combined debts already eat most of their income can be capped well below the equity maximum, or declined outright, while a borrower with the same house and a lighter debt load is approved at the full line. Before you apply anywhere, run your debts through the debt-to-income calculator, check the payment this page produces against your monthly budget, and compare the HELOC result with the mortgage calculator and the house affordability calculator on the same home value, so the line you request is a number your budget already supports rather than a number a lender has to talk you down from. A smaller requested line, with the repayment payment already fitting your budget, is also a stronger application than a maximum line that only fits during the interest-only years.

With the pre-filled defaults — Home Value $450,000, Current Mortgage Balance $260,000, Max Combined LTV (lender limit) 85%, Credit Line Amount (drawn) $50,000, Interest Rate (APR) 8.5%, Draw Period 10 yrs, Repayment Period 20 yrs — the HELOC Calculator returns Home Equity $190,000.00, Maximum Credit Line $122,500.00, Combined Loan-to-Value (CLTV) 68.89%, Draw Period Payment (interest only) $354.17, Interest Paid During Draw Period $42,500.00, Repayment Period Payment $433.91, Interest Paid During Repayment $54,138.79, Total Cost (principal + interest) $146,638.79. Change any input and those results update instantly, so you can see exactly how each number you enter moves the answer.