How to use the heloc payment calculator
- Enter the balance you owe, which is the amount drawn and still unpaid when repayment begins.
- Enter the rate and length of the draw period, when many lines of credit allow interest-only payments.
- Enter the rate and length of the repayment period. Use the same rate if you expect no change.
- Read the interest-only payment, the repayment payment, the jump between them and the interest each phase costs.
Formula
Interest-only payment = balance x APR / 12
Repayment payment = balance x i / (1 - (1 + i)^-n), with i = APR / 12 and n = repayment months
Draw period interest = interest-only payment x draw months
Repayment interest = sum of each month's balance x APR / 12 over the schedule
Interest is rounded to the cent each month, and the last repayment clears the balance.
A $50,000 balance at 8%
With a $50,000 balance at 8% APR, the interest-only payment is $50,000 x 0.08 / 12 = $333.33. Over a 10-year draw period (120 months) that is $39,999.60 of interest, and none of the balance is repaid.
If repayment then runs 20 years at 8%, the payment is $418.22 a month, which is $84.89 more than the interest-only payment. A month by month schedule shows $50,372.97 of interest during repayment, so total interest is $90,372.57 across the 30 years.
How the two phases differ
A home equity line of credit usually has a draw period, when you can borrow against the line and may only need to pay interest, and a repayment period, when borrowing stops and you pay principal and interest. The payment can rise sharply when the second phase begins because the balance has not been reduced.
This tool assumes you owe the same balance from the start of the draw period until repayment begins. If you pay down principal during the draw, your repayment payment will be lower, so enter the smaller balance you expect to carry.
What to confirm with your lender
HELOC rates are usually variable, so the real payment moves with the index and margin in your agreement. Lenders also differ on fees, rate caps, minimum payments and how the repayment payment is figured.
For a fixed rate lump sum loan use the home equity loan calculator. To work through any payment schedule on its own try the loan calculator, and for interest-only terms in general see the interest only loan calculator.
Assumptions and limits
- The balance stays the same through the draw period, with no new draws and no extra principal payments.
- Each rate is a fixed annual percentage rate for its phase. Real HELOC rates usually change.
- Payments are monthly and interest is rounded to the cent each month.
- Fees, rate caps, taxes and lender-specific payment rules are not modeled.
Frequently asked questions
How is a HELOC payment calculated during the draw period?
Multiply the balance by the annual rate and divide by 12. For $50,000 at 8% that is $333.33 a month, and the balance stays the same.
Why does the payment go up when repayment starts?
The payment begins to include principal, so the balance is paid off over the repayment period. The same balance spread over a fixed number of months costs more each month than the interest alone.
Can I pay principal during the draw period?
Many lines allow it. Paying principal lowers the balance, so the interest-only payment and the later repayment payment both fall. Enter the balance you expect to carry into repayment.
Why might my lender's numbers differ?
Variable rates, fees, the day count used for interest and how a lender sets the repayment payment all change the figures. This result is an estimate from the rates you enter.