HELOC calculator

Two payments, and the day one becomes the other

A home equity line of credit runs in two halves. During the draw period you can take money as you need it and only the interest is due, so the payment is small and the balance does not move. When the draw period ends the line closes, and whatever is owed has to be repaid over the years that remain.

The payment at that point does not rise a little. It rises to whatever it takes to clear the whole balance in the remaining term, which is usually several times the interest-only figure. Everyone is told about this and almost nobody has seen the two numbers side by side before signing, which is what this page is for.

Nothing has gone wrong on the day it happens. It is the arrangement working exactly as written, and the only defence against it is having known the figure in advance.

The interest paid while drawing buys time and nothing else

Every payment during the draw period is interest. None of it touches the balance, so the repayment period starts on the whole of what was drawn, however many years of payments came before it. The total shown for that period is the price of the arrangement, paid for the privilege of a small payment and access to the money.

That is not automatically a bad trade. Borrowing only what is needed when it is needed, rather than a lump sum sitting there accruing interest from day one, is a real advantage for work that happens in stages. But it is a trade, and it is worth seeing what the time cost.

The rate moves, so this is a scenario

Lines of credit are almost always variable, tracking a published rate. A schedule worked out at today's rate is therefore a scenario rather than a forecast, and treating it as a promise is the single most expensive mistake available here.

The second rate on the form exists for that reason. Running the same line a few points higher shows the range rather than a point, and the honest way to use this page is to check that the higher figure is one you could still pay.

What this page does not model

It assumes the balance is drawn at the start and stays put through the draw period. A real line drawn in stages, or partly repaid and drawn again, will differ. There are no annual fees, no draw fees, no minimum draw requirements, no closing costs, and no lender who freezes the line because values fell, which is a thing that happens.

Nor does it model the interest-only payment changing during the draw period, which it will whenever the rate moves.

Common questions

What does HELOC stand for?

Home equity line of credit. The acronym and the full phrase mean the same thing, and this is the page for both.

Why is the schedule only the repayment years?

Because nothing happens to the balance before then. Every month of the draw period is the same interest payment on the same balance, so a table of it would be one row repeated. The figure for the whole draw period is in the result instead.

Can I pay down the balance during the draw period?

Usually yes, and it is generally the best thing to do with a line of credit, because it shrinks the payment jump at the other end. This page models the arrangement as written rather than as improved, which is the conservative way round.

Is a HELOC cheaper than a home equity loan?

It is cheaper at first and not necessarily in the end. The interest-only period costs real money that repays nothing, while a fixed-rate loan starts repaying from the first month at a rate that cannot move. Which one wins depends on the rate path and on whether you need all the money at once.

Is anything I type stored?

No. The calculation happens on the server as part of rendering the page, nothing is written down, and the access log for this site drops the query string precisely so that the numbers you enter are never recorded.