HELOC Calculator
Estimate your available home equity line of credit, monthly payments during draw and repayment periods, and total interest cost.
Payment Timeline
Cost Summary
HELOC vs Cash-Out Refi vs Personal Loan
How HELOCs Work
A Home Equity Line of Credit (HELOC) is a revolving credit line secured by the equity in your home. Unlike a traditional loan where you receive a lump sum, a HELOC works more like a credit card — your lender approves a maximum credit limit based on your available equity, and you can borrow against it as needed. Most lenders allow you to borrow up to 80-85% of your home's value minus your remaining mortgage balance. Because the loan is secured by your property, HELOC rates are significantly lower than unsecured options like credit cards or personal loans. The tradeoff is that your home serves as collateral, meaning failure to repay could result in foreclosure.
HELOCs operate in two distinct phases. The first is the draw period, which typically lasts 5 to 10 years. During this time, you can borrow and repay funds freely up to your credit limit, similar to a credit card. Most HELOCs require only interest-only payments during the draw period, which keeps your monthly costs low but means you are not paying down the principal balance. Some borrowers make the mistake of treating the draw period as free money because the payments feel small — but every dollar borrowed is accumulating interest and will need to be repaid in full later.
The second phase is the repayment period, which typically runs 10 to 20 years. Once the draw period ends, you can no longer borrow from the line. Your balance at that point converts to a standard amortizing loan, and your monthly payment increases — often dramatically — because you are now paying both principal and interest. This payment shock catches many borrowers off guard. If you borrowed $50K during the draw period at 8%, your payment jumps from $333 per month (interest only) to $418 per month (principal and interest) when the repayment period begins. Planning ahead for this transition is essential to avoid financial strain.
HELOCs offer several advantages: lower interest rates than personal loans or credit cards, interest that may be tax-deductible when funds are used for home improvements, flexible access to funds as you need them, and minimal closing costs compared to a cash-out refinance. However, they carry real risks. HELOC rates are almost always variable, meaning your payments can increase if interest rates rise. Your home is on the line as collateral. And the payment shock when transitioning from draw to repayment can be severe if you have not budgeted for it. HELOCs work best for home renovations, strategic debt consolidation (if you are disciplined about not re-accumulating debt), or as an emergency fund backup. They are a poor choice for vacations, cars, or other depreciating assets — you should never put your home at risk for something that loses value.