HELOC Payment Calculator
Calculate HELOC payments during draw period and repayment period, with interest-only and amortizing options.
About This Calculator
A Home Equity Line of Credit (HELOC) is one of the most flexible ways to tap into your home's equity, but its variable rates and unique two-phase structure can make payment planning complex. Unlike a traditional home equity loan with fixed payments, HELOCs operate more like a credit card secured by your home—you have a credit limit, borrow what you need, and pay variable interest on what you've drawn. Americans currently hold over $350 billion in HELOC debt, with the average HELOC balance around $42,000. Understanding exactly how your payments will change over the life of your HELOC—particularly the dramatic shift from draw period to repayment period—is essential for sound financial planning.
Our HELOC Payment Calculator helps you estimate monthly payments during both the draw period (when you can borrow and typically pay interest only) and the repayment period (when you must pay down the principal with fully amortizing payments). Enter your credit line amount, current balance, interest rate (or calculate it from prime rate plus your margin), and period lengths to see exactly what you'll pay each month. The calculator reveals the total interest cost over the life of your HELOC, generates detailed payment schedules, and shows the "payment shock" many borrowers experience when transitioning from interest-only to principal-and-interest payments. Whether you're considering opening a HELOC, planning for upcoming payment changes, or strategizing ways to pay it off faster, this tool provides the comprehensive analysis you need to make informed decisions about leveraging your home equity.
How to Use the HELOC Payment Calculator
- 1Enter your HELOC credit line limit (the total approved amount you can borrow).
- 2Input your current balance drawn—the amount you actually owe right now.
- 3Enter your interest rate directly, or calculate it by entering the current prime rate plus your margin.
- 4Select your draw period length (typically 5-10 years) when you can borrow and make lower payments.
- 5Select your repayment period length (typically 10-20 years) when you must pay off the balance.
- 6Choose your payment type during the draw period: interest-only minimum or interest plus principal.
- 7For LTV analysis, enter your current home value and existing first mortgage balance.
- 8Review the side-by-side comparison of draw period versus repayment period payments.
- 9Examine the payment schedule to see how your balance decreases over time.
- 10Use the results to plan for the payment increase when the repayment period begins.
Formula
Interest-Only Payment = Balance × (Annual Rate / 12)HELOC payment calculations differ based on the payment phase. During the draw period, the minimum payment is typically interest-only: multiply your current balance by the monthly interest rate (annual rate divided by 12). For example, a $50,000 balance at 9% annual rate equals $375/month in interest ($50,000 × 0.09 / 12). During the repayment period, payments convert to fully amortizing using the standard loan formula: M = P × [r(1+r)^n] / [(1+r)^n - 1], where P is the remaining balance, r is the monthly rate, and n is the number of repayment period months. This formula ensures the loan is fully repaid by the end of the repayment period.
Understanding HELOC Structure: Draw Period vs. Repayment Period
The Two-Phase HELOC Lifecycle:
A HELOC operates in two distinct phases, each with dramatically different payment requirements:
Phase 1: Draw Period (Typically 5-10 Years)
- You can borrow up to your credit limit at any time
- Minimum payment is usually interest-only
- Your balance can fluctuate as you borrow and repay
- Payments are relatively low because you're not required to pay principal
- The credit line functions like a large credit card secured by your home
Phase 2: Repayment Period (Typically 10-20 Years)
- You can no longer borrow additional funds
- Payments convert to fully amortizing (principal + interest)
- Balance must be paid to zero by the end of the period
- Monthly payments increase significantly—often 50-100% higher
- Acts like a traditional fixed-term loan
Example: $50,000 HELOC at 9% Interest:
| Phase | Monthly Payment | What It Covers |
|---|---|---|
| Draw Period | $375 | Interest only |
| Repayment (20-yr) | $450 | Principal + Interest |
| Repayment (15-yr) | $507 | Principal + Interest |
| Repayment (10-yr) | $633 | Principal + Interest |
Critical Planning Point: The transition from draw to repayment period is when many borrowers face financial stress. A $75 to $258 monthly increase (depending on repayment term) may seem manageable, but it represents a 20-69% jump in required payment. Plan for this increase before it arrives.
Interest-Only vs. Amortizing Payments During Draw Period
The Draw Period Payment Choice:
During the draw period, most HELOCs require only interest payments. However, you can choose to pay more:
Option 1: Interest-Only Payments (Minimum)
- Lowest monthly payment
- Balance never decreases from payments alone
- Maximum flexibility in cash flow
- Highest total interest cost over life of HELOC
- Greater payment shock when repayment period begins
Example ($50,000 at 9%):
- Monthly payment: $375
- 10-year draw period interest: $45,000
- Balance at end of draw period: $50,000
- Then repayment begins on full original balance
Option 2: Interest + Principal Payments
- Higher monthly payments during draw period
- Balance decreases over time
- Lower total interest cost
- Smaller payment shock at repayment period
- Builds equity faster in your home
Example ($50,000 at 9%, 1% monthly principal):
- Initial monthly payment: $875 ($375 interest + $500 principal)
- Payment decreases as balance decreases
- 10-year draw period: Balance paid down significantly
- Much lower payment during repayment period (smaller balance)
Cost Comparison Over 30 Years (10-year draw + 20-year repayment):
| Strategy | Total Interest | Total Payments | Savings vs IO |
|---|---|---|---|
| Interest-Only | $73,500 | $123,500 | Baseline |
| 1% Principal | $52,200 | $102,200 | $21,300 |
| 2% Principal | $38,600 | $88,600 | $34,900 |
Recommendation: Even paying a small amount toward principal during the draw period dramatically reduces total cost and eases the transition to repayment.
HELOC vs. Home Equity Loan: When Each Makes Sense
Head-to-Head Comparison:
| Feature | HELOC | Home Equity Loan |
|---|---|---|
| Interest Rate | Variable (prime + margin) | Fixed |
| Borrowing | Draw as needed up to limit | Lump sum upfront |
| Payments | Interest-only option | Fixed principal + interest |
| Flexibility | High - borrow and repay | Low - fixed amount |
| Rate Risk | Rates can increase | Protected from increases |
| Best For | Ongoing/uncertain needs | Known, one-time expense |
Choose a HELOC When:
- You need funds over time (home renovation phases, college tuition)
- You're uncertain how much you'll actually need
- You want the option to repay and reborrow
- You can handle rate variability
- You want lower initial payments
- You have good financial discipline
Choose a Home Equity Loan When:
- You need a specific amount for a one-time expense
- You want predictable, fixed payments
- Interest rates are low and expected to rise
- You prefer simplicity over flexibility
- You might be tempted to overborrow with revolving credit
- You're on a fixed income and need payment stability
Real-World Scenario: Kitchen renovation with unknown final cost
- HELOC advantage: Borrow as contractors bill you, pay interest only on amounts drawn
- Home Equity Loan: Must estimate total cost upfront, pay interest on full amount even if project costs less
Debt consolidation for $40,000 in credit cards
- Home Equity Loan advantage: Fixed payment forces payoff discipline
- HELOC risk: Temptation to reborrow after paying down, recreating debt cycle
How HELOC Rates Work: Prime Rate + Margin Explained
Understanding Variable HELOC Rates:
HELOC rates are typically expressed as "Prime + Margin" and adjust as the prime rate changes.
What is the Prime Rate?
- The prime rate is the benchmark interest rate that banks charge their most creditworthy customers
- It's tied to the Federal Reserve's federal funds rate
- When the Fed raises or lowers rates, prime rate moves within days
- As of January 2026, the prime rate is approximately 8.5%
- Historical range: 3.25% (2020-2022) to 21.5% (1980)
What is Your Margin?
- The margin is the additional percentage your lender adds to prime
- Based on your credit score, LTV, and lender policies
- Typical range: 0.5% to 2%
- Locked for the life of your HELOC (doesn't change)
- Higher credit scores and lower LTV = lower margins
Example Rate Calculations:
| Credit Score | Margin | Prime Rate | Your HELOC Rate |
|---|---|---|---|
| 760+ | 0.5% | 8.5% | 9.0% |
| 720-759 | 1.0% | 8.5% | 9.5% |
| 680-719 | 1.5% | 8.5% | 10.0% |
| 660-679 | 2.0% | 8.5% | 10.5% |
How Rate Changes Affect Your Payment:
On a $50,000 HELOC balance, each 0.25% rate change equals about $10/month:
| Prime Rate | Your Rate (1% margin) | Monthly Interest |
|---|---|---|
| 7.5% | 8.5% | $354 |
| 8.0% | 9.0% | $375 |
| 8.5% | 9.5% | $396 |
| 9.0% | 10.0% | $417 |
| 9.5% | 10.5% | $438 |
Rate Caps and Floors: Most HELOCs include:
- Lifetime cap: Maximum rate (often 18-21%)
- Lifetime floor: Minimum rate (often your initial rate or margin + 2%)
- Periodic cap: Maximum change per adjustment (some HELOCs have this)
Always check your HELOC agreement for these important protections.
HELOC Tax Deductibility Rules (2026)
Current Tax Law for HELOC Interest:
The Tax Cuts and Jobs Act of 2017 significantly changed HELOC interest deductibility. Here's what you need to know:
Interest IS Deductible If:
- Funds are used to "buy, build, or substantially improve" the home securing the HELOC
- Combined mortgage debt (first mortgage + HELOC) doesn't exceed $750,000 ($375,000 if married filing separately)
- You itemize deductions (standard deduction must be lower than itemized)
Interest is NOT Deductible If:
- Funds are used for debt consolidation
- Funds are used for education expenses
- Funds are used for vacations, cars, or other personal expenses
- Funds are used for investment purposes (different rules apply)
Examples:
Deductible Use:
- Borrow $50,000 from HELOC
- Use to add a new master bedroom to your home
- Interest paid is tax-deductible (up to debt limits)
- Keep receipts and documentation!
Non-Deductible Use:
- Borrow $50,000 from HELOC
- Use to pay off credit cards and car loan
- Interest is NOT tax-deductible under current law
- May still make financial sense if HELOC rate is lower
Documentation Requirements: If you plan to deduct HELOC interest:
- Keep detailed records of how funds were used
- Save all receipts for home improvement expenses
- Maintain a separate account for HELOC funds if possible
- Match borrowing dates to expense dates
- Consult a tax professional for complex situations
Important Note: Tax laws can change. The current provisions are set to expire or be revised. Always consult a tax professional for your specific situation.
Strategies to Minimize HELOC Interest Costs
Smart HELOC Management Strategies:
Strategy 1: Pay Principal During Draw Period Even though only interest is required, paying principal significantly reduces total cost.
Impact on $50,000 HELOC (9%, 10-year draw, 20-year repayment):
| Extra Principal/Month | Interest Saved | Years Saved |
|---|---|---|
| $100 | $18,500 | 3.2 years |
| $250 | $31,400 | 6.8 years |
| $500 | $42,100 | 11.4 years |
Strategy 2: Make Bi-Weekly Payments Pay half your monthly payment every two weeks (26 half-payments = 13 full payments/year).
- Saves interest by reducing average daily balance
- Equals one extra payment per year
- Can shave 2-3 years off repayment
Strategy 3: Use Windfalls Strategically Apply tax refunds, bonuses, or gifts directly to principal:
- $3,000 annual payment reduces 10-year $50,000 HELOC by 3+ years
- Front-loaded paydown saves more interest than later payments
Strategy 4: Refinance When Rates Drop If interest rates decrease significantly:
- Refinance HELOC into new HELOC at lower margin
- Convert to fixed-rate home equity loan if rates are historically low
- Consider cash-out mortgage refinance to lock in rate
Strategy 5: Convert to Fixed-Rate Option Many lenders offer the ability to convert HELOC balances to fixed-rate:
- Locks in current rate for portion of balance
- Eliminates rate risk on that portion
- May have fees or minimum amounts
- Useful when rates are expected to rise
Strategy 6: Pay Off Before Repayment Period The most powerful strategy is eliminating the balance before entering repayment:
- Avoids payment shock entirely
- Forces disciplined repayment
- Frees up the credit line for true emergencies
Pro Tips
- 💡Budget for the repayment period payment from day one—don't be caught off guard by the 50-100% payment increase when the draw period ends.
- 💡Consider paying some principal during the draw period even though it's not required—this reduces total interest and eases the transition to repayment.
- 💡Track the prime rate and understand how changes affect your payment—each 0.25% increase adds about $10/month per $50,000 of balance.
- 💡Keep HELOC usage below 80% of your limit to maintain a healthy credit utilization ratio and preserve borrowing flexibility for emergencies.
- 💡If using HELOC funds for home improvements, keep detailed records and receipts to support potential tax deductions.
- 💡Consider the fixed-rate conversion option if your lender offers it when you have a large balance and rates are expected to rise.
- 💡Never use HELOC funds for depreciating assets like cars or vacations—reserve this debt for investments in your home or other appreciating purposes.
- 💡Review your HELOC statement monthly and verify the rate matches your agreement (prime + your margin)—errors do occur.
- 💡Build an emergency fund separately from your HELOC—don't rely on home equity as your only financial safety net.
- 💡If interest rates drop significantly, shop for a HELOC refinance—you may qualify for a lower margin with your improved credit or home equity.
- 💡Set up automatic payments to avoid missed payments that could result in late fees, rate increases, or credit score damage.
- 💡Calculate your break-even point if considering paying closing costs for a lower rate—it may not be worth it for short-term borrowing.
Frequently Asked Questions
During the draw period, the minimum payment on most HELOCs is interest-only, calculated as your current balance multiplied by the monthly interest rate (annual rate / 12). For example, on a $50,000 balance at 9% annual rate, the minimum monthly payment would be $375 ($50,000 × 0.09 / 12). Some HELOCs require a minimum principal payment (typically 1-2% of balance) in addition to interest, and some have a minimum payment floor (like $50 or $100) regardless of balance. Check your specific HELOC agreement for exact terms.
