Available Credit
Monthly Draw Payment
Monthly Repayment
Table of Contents
Available Credit, Draw Payment & Repayment in One View
A HELOC has two distinct payment phases — interest-only during the draw period, fully amortizing once repayment begins — and the jump between them surprises many borrowers. This calculator shows both numbers up front, plus the maximum credit line based on your home equity.
How the HELOC numbers are calculated
The calculator runs three separate computations: available credit, interest-only draw payment, and amortizing repayment payment.
1. Available credit (CLTV formula)
Available = (Home Value × Max CLTV) − Mortgage Balance
2. Interest-only payment during the draw period
I = (Balance × APR) ÷ 12
3. Fully amortizing payment during the repayment period
M = P × [ r(1+r)n ] ÷ [ (1+r)n − 1 ]
- P — outstanding balance at start of repayment
- r — monthly interest rate (APR ÷ 12)
- n — number of monthly payments (repayment years × 12)
Worked example using the calculator defaults ($450,000 home, $250,000 mortgage, 80% CLTV, 7.5% APR, 10-year draw, 20-year repayment):
- Available credit = ($450,000 × 0.80) − $250,000 = $110,000
- If fully drawn, monthly interest-only payment = $110,000 × 0.075 ÷ 12 = $687.50/month
- Repayment phase: r = 0.00625, n = 240, (1+r)240 ≈ 4.453
- M = 110,000 × (0.00625 × 4.453) ÷ (4.453 − 1) ≈ $886.41/month
The repayment-phase payment is about 29% higher than the draw-period payment in this example. If you only made the minimum interest-only payment during the draw period, this jump is what hits your budget on conversion day.
Draw period vs repayment period
A HELOC behaves differently in its two phases, and that difference is what causes most of the confusion:
| Feature | Draw period (typically 10 yrs) | Repayment period (typically 10–20 yrs) |
|---|---|---|
| Can borrow new funds? | Yes, up to the credit limit | No — the line is closed |
| Minimum payment | Interest-only on outstanding balance | Fully amortizing principal + interest |
| Rate type | Variable (usually prime + margin) | Variable, or fixed if you converted |
| Principal payments | Optional (you can repay and re-draw) | Built into every payment |
| Payment if $50K balance at 7.5% | About $313/mo | About $403/mo over 20 yrs |
HELOC vs home equity loan vs cash-out refi
Three products all let you tap home equity but they have very different shapes:
| HELOC | Home equity loan | Cash-out refinance | |
|---|---|---|---|
| Disbursement | Revolving line | Lump sum | Lump sum |
| Rate | Variable (typically) | Fixed | Fixed |
| Affects primary mortgage | No | No (second lien) | Yes — replaces it |
| Closing costs | Low ($0–$1,000 typical) | Moderate ($500–$3,000) | High (2–5% of loan) |
| Best for | Flexible / staged use | One-time fixed expense | Big lump sum + lower mortgage rate |
The key question is whether your existing first-mortgage rate is better than current market rates. If you locked in a 3–4% mortgage during 2020–2021, refinancing the whole thing to access equity is usually a bad trade — a HELOC or home equity loan lets you keep the cheap first lien intact.
Variable rate risk
Most HELOCs price at prime + margin, where prime moves with the Federal Reserve's federal funds rate. A borrower who opened a HELOC at prime + 1% in early 2022 saw the effective rate move from about 4.5% to over 9.5% in 18 months as the Fed tightened — roughly doubling the monthly interest payment on any drawn balance.
- Fixed-rate conversion options: many lenders let you lock all or part of the drawn balance at a fixed rate for an extra fee. Worth using if rates look likely to rise.
- Rate caps: federal law caps HELOC lifetime rates, but the cap is often 18% or higher — it limits worst-case disasters, not normal fluctuations.
- Index choice: nearly all US HELOCs use the prime rate as the index. Older HELOCs may reference LIBOR; those are being transitioned to SOFR or prime under the LIBOR Act of 2022.
Qualification requirements
Lenders evaluate four things when underwriting a HELOC:
- Credit score: 620 minimum at most lenders; 720+ for the best rates. HELOC pricing is more credit-sensitive than first-mortgage pricing.
- Combined LTV: total of all liens (mortgage + HELOC) divided by appraised value, capped at 80–90% depending on lender.
- Debt-to-income ratio: typically capped at 43% inclusive of the HELOC payment at its fully-drawn, fully-amortizing rate. Check yours with the debt-to-income ratio calculator.
- Property type and occupancy: primary residences get the best terms. Investment properties and second homes often face lower CLTV caps and higher rates.
Risks and limitations of this calculator
- This calculator assumes a constant interest rate. Real HELOCs are typically variable, so the actual draw-period payment fluctuates with the prime rate.
- The repayment-phase calculation assumes you draw the full credit line and never make principal payments during the draw period. If you pay down principal as you go, the repayment payment will be lower.
- Closing costs, annual fees, and inactivity fees vary by lender and are not modeled here.
- Your home is collateral. Missing payments on a HELOC can lead to foreclosure just like a primary mortgage. Borrow conservatively.
Sources & references
- Consumer Financial Protection Bureau — Owning a Home — HELOC disclosures, draw-to-repayment transition, and consumer protections.
- Federal Reserve H.15 — Selected Interest Rates — weekly publication of the bank prime loan rate that anchors HELOC pricing.
- IRS Publication 936 — Home Mortgage Interest Deduction — current rules on when HELOC interest is tax-deductible.
FAQs
Most lenders cap the combined loan-to-value (CLTV) at 80% — meaning your primary mortgage plus the HELOC together cannot exceed 80% of the appraised home value. The formula is: Available HELOC = (Home Value × max CLTV) − Existing Mortgage Balance. On a $450,000 home with a $250,000 mortgage and an 80% cap, that is ($450,000 × 0.80) − $250,000 = $110,000 of available credit. Some lenders allow 85% or 90% CLTV for strong credit profiles.
During the draw period, most HELOCs require interest-only payments — calculated as (balance × annual rate) ÷ 12. A $50,000 balance at 7.5% costs $312.50/month interest-only. Once the draw period ends, the balance is amortized over the repayment period (typically 10–20 years), and payments include principal. The same $50,000 balance at 7.5% over 20 years jumps to about $403/month — the payment shock many HELOC borrowers underestimate.
Use a HELOC when you need flexible, on-demand access to funds (renovations in stages, irregular business needs) and want to leave your primary mortgage untouched. Use a cash-out refinance when you need a lump sum, want a fixed rate, and current mortgage rates are at or below your existing rate. If you have a 3% mortgage from 2021 and refinancing means trading it for a 7% loan on the entire balance, a HELOC is usually the better choice even at a higher HELOC rate — because only the new borrowing carries the higher rate.
Under the Tax Cuts and Jobs Act of 2017, HELOC interest is deductible only if the proceeds are used to buy, build, or substantially improve the home securing the debt — for example, a kitchen remodel or a new addition. Using HELOC funds to consolidate credit card debt, pay tuition, or buy a car makes the interest non-deductible. The deduction also requires you to itemize rather than take the standard deduction. Consult a tax professional for your specific situation.
Three things happen simultaneously: you can no longer draw new funds, the outstanding balance converts from interest-only to fully amortizing payments, and the rate may reset. The monthly payment often jumps 50–100% on the conversion date. Borrowers who only made interest-only payments during the draw period are most exposed — they enter repayment owing the full balance. Options to manage this include refinancing the HELOC, converting to a fixed-rate home equity loan, or paying the balance down aggressively in the final draw years.