Calculate how much you can borrow with a Home Equity Line of Credit (HELOC). Estimate your monthly payments during the draw period and the repayment period, and see the total cost.
See how different scenarios affect your HELOC borrowing power and payment amounts.
A homeowner with a $400,000 home and a $250,000 mortgage balance wants to see their HELOC options.
| Metric | Value |
|---|---|
| Home Value | $400,000 |
| Mortgage Balance | $250,000 |
| Available Equity | $150,000 |
| Max CLTV | 85% |
| HELOC Credit Limit | $90,000 |
| Draw Amount | $50,000 |
| Draw Rate / Repay Rate | 7.5% / 8.0% |
| Draw Period / Repay Period | 10 years / 20 years |
| Monthly Payment (Draw) | $312.50 (interest-only) |
| Monthly Payment (Repay) | $418.22 (fully amortized) |
| Total Cost | $137,873 |
A homeowner with a $500,000 home and only $150,000 remaining on the mortgage.
| Metric | Value |
|---|---|
| Home Value | $500,000 |
| Mortgage Balance | $150,000 |
| Available Equity | $350,000 |
| Max CLTV | 85% |
| HELOC Credit Limit | $275,000 |
| Draw Amount | $100,000 |
| Draw Rate / Repay Rate | 7.0% / 7.5% |
| Draw Period / Repay Period | 10 years / 20 years |
| Monthly Payment (Draw) | $583.33 (interest-only) |
| Monthly Payment (Repay) | $805.56 (fully amortized) |
| Total Cost | $263,334 |
A conservative borrower with a $350,000 home, $200,000 mortgage, using a 75% CLTV.
| Metric | Value |
|---|---|
| Home Value | $350,000 |
| Mortgage Balance | $200,000 |
| Available Equity | $150,000 |
| Max CLTV | 75% |
| HELOC Credit Limit | $62,500 |
| Draw Amount | $25,000 |
| Draw Rate / Repay Rate | 6.5% / 7.0% |
| Draw Period / Repay Period | 10 years / 15 years |
| Monthly Payment (Draw) | $135.42 (interest-only) |
| Monthly Payment (Repay) | $224.67 (fully amortized) |
| Total Cost | $56,691 |
Your available equity is simply the current market value of your home minus any outstanding mortgage balance.
Lenders typically allow you to borrow up to a certain percentage of your home's value, known as the Combined Loan-to-Value (CLTV) ratio. The maximum CLTV usually ranges from 80% to 90%.
During the draw period, you typically only need to pay the interest that accrues each month. This keeps payments low but does not reduce the principal.
Once the draw period ends, you enter the repayment period. Payments are recalculated to fully amortize the remaining balance over the repayment term using the standard loan payment formula.
The total cost of the HELOC includes the total interest paid during both the draw period and the repayment period, plus the original draw amount.
The draw period is the initial phase of a HELOC (typically 5 to 10 years) during which you can borrow funds from your credit line. During this period, you usually only need to make interest-only payments on the amount you've drawn. You can borrow, repay, and borrow again up to your credit limit, similar to a credit card. At the end of the draw period, the remaining balance enters the repayment period. Many lenders offer checkbooks, debit cards, or online transfer options to access your HELOC funds during the draw period, making it convenient to use as needed. Some HELOCs also have a minimum draw requirement or an annual fee that applies regardless of usage.
Once the draw period ends, the HELOC enters the repayment period (typically 10 to 20 years). During this phase, you can no longer borrow additional funds. Your monthly payments are recalculated to fully amortize (pay off) the remaining balance over the repayment term. These payments are typically much higher than the interest-only payments during the draw period because they include both principal and interest. For example, a $50,000 balance at 8% interest would require approximately $312.50 per month during the draw period (interest-only) but jumps to about $418 per month during the repayment period. It is crucial to plan for this payment increase when taking out a HELOC.
Most HELOCs have variable interest rates tied to the prime rate or another benchmark index. This means your payments can fluctuate over time as market rates change. Some lenders offer fixed-rate options or the ability to convert a portion of your variable-rate balance to a fixed rate. It's important to understand the terms of your specific HELOC and plan for potential rate increases, especially if you are considering a large draw amount. When the Federal Reserve raises interest rates, your HELOC rate may increase proportionally, sometimes within a billing cycle. Many HELOCs have a lifetime interest rate cap (e.g., maximum 18%) but no floor, so rates can also decrease when the prime rate drops.
A HELOC (Home Equity Line of Credit) is a revolving line of credit that allows you to borrow funds as needed during a draw period, with variable interest rates and interest-only payment options. A home equity loan (sometimes called a second mortgage) provides a lump sum of cash upfront with a fixed interest rate and fixed monthly payments over a set term. HELOCs offer more flexibility for ongoing or unpredictable expenses, while home equity loans are better for one-time, known costs.
Under the Tax Cuts and Jobs Act (TCJA), interest on HELOCs is only tax deductible if the funds are used to "buy, build, or substantially improve" the home that secures the loan. If you use HELOC funds for other purposes (like paying off credit card debt, funding a vacation, or buying a car), the interest is generally not deductible. Consult with a tax professional for personalized advice regarding your specific situation.
The maximum Combined Loan-to-Value (CLTV) ratio for a HELOC varies by lender but typically ranges from 80% to 90%. This means the total of your first mortgage plus the HELOC cannot exceed 80-90% of your home's appraised value. A higher credit score, lower debt-to-income ratio, and a strong payment history may help you qualify for a higher CLTV. Some credit unions and community banks may offer CLTVs up to 95% in certain cases.