HELOC Payment Calculator 2021

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Our HELOC payment calculator provides the monthly payment required for a home equity line of credit (HELOC). The monthly payment for a HELOC is divided into two phases based on the point of time during the HELOC. First, the draw period which is usually 10 years followed by the repayment period which is usually 15 years. In the draw period, you can borrow funds from the HELOC and are only required to make interest payments and do not have to repay the principal. In the repayment period, you have to pay back the principal and interest on the HELOC.

In order to calculate your monthly HELOC payment, the following inputs are required: your HELOC loan amount, interest rate, length of draw period, and length of repayment period. You can use our HELOC Calculator to find out your potential HELOC limit.

HELOC Payments

How are HELOC repayments structured?

A home equity line of credit (HELOC) allows homeowners to borrow funds based on the equity they own in the home. Your HELOC limit can be determined using the loan to value (LTV) ratio and remaining mortgage balance. The HELOC repayment is structured in two phases:

Draw Period

The draw period is the phase where you can borrow funds from the HELOC by bank transfer, check or even a credit card. The draw period is usually 10 years but can be longer or shorter depending on the contract with the lender.

During the draw period, you are only required to pay the minimum interest payment on the outstanding balance and not the principal itself. Therefore, your minimum monthly payment can change from month to month as your outstanding balance changes. You are free to take funds and repay funds if you choose to; however, if you are strapped for cash and do not pay back the principal you will not be fined as only interest payments are required.

Repayment Period

Repayment Period – In the repayment period you can no longer access the HELOC which means no more funds can be borrowed. During this period both the outstanding balance and interest have to be repaid. The balance is amortized over the remaining period and the monthly payment stays constant during this period. The repayment period is usually 20 years. For more information on amortization, take a look at our amortization calculator to learn more about how loans are amortized.

How does the HELOC Payment Calculator work?

Our HELOC payment calculator determines the monthly payment on your HELOC. The HELOC calculator can be used to determine the total eligible loan amount. The calculator gives both the monthly draw period payment and the monthly repayment period payment. An example for the calculations for each period is shown below.

How does a HELOC Payment Calculator help me?

The HELOC payment calculator can provide valuable information by changing the inputs of the calculator:

1. Total Interest: The calculator can show you the total interest you will have to pay over the life of the loan and how this can change by altering the length of the loan.
2. Interest Rate Change: If you are shopping around with different lenders, this calculator can be used to see the difference between payments with varying interest rates provided by lenders.
3. Initial Monthly Payment: During the draw period only a minimum interest payment needs to be made, this allows you to plan the payments. If the monthly interest payments are under budget, you can choose to make partial principal repayments too, which will reduce the outstanding balance.
4. Monthly Payment Difference: It is important to understand that the payment during the repayment period can be significantly higher than the draw period. For example, on a $50,000 HELOC with a 5% interest rate, the payment during the draw period is $208. Whereas, during the repayment period the monthly payment can jump to $330 if it is over 20 years. Therefore, this is a significant increase and can be a problem for you especially if you have other debt payments or a high debt-to-income (DTI) ratio. The calculator can show you how the payment rises and then you can determine if it is manageable.
5. Budgeting: During the repayment period if the monthly payment is too high you can choose to increase the repayment period resulting in lower monthly payments. However, if the period is extended the total interest paid also increases.

What if I cannot pay off my HELOC?

If you are unable to pay off your HELOC during the repayment period, you will be required to make a balloon payment at the end of the HELOC. A balloon payment is a lump sum payment to pay back the principal or borrowed funds during the life of the loan. If you cannot make a balloon payment, consider negotiating with your lender to extend the HELOC repayment period or refinance the HELOC.

Should I get a HELOC if I plan to move soon?

In most cases, no, if you plan to move from your home within a short period of time, getting a HELOC is not a good idea. The reason being if you have a large balance on your HELOC and you decide to move then you will be required to pay back the HELOC in one go. If you sell the home, then paying back the HELOC will eat into profits and there can be an early closure fee if you close the HELOC within a few years of opening it.

General HELOC FAQ

How does a HELOC work?

A home equity line of credit lets you tap into the equity you own in the home allowing you to borrow funds based on this equity. It is not like a traditional loan where a lump sum is given at the onset of the loan, instead a HELOC functions like a credit card. You can take funds out of the HELOC and only need to make minimum interest payments on the balance, and can choose to pay back some of the principal. The structure of payments during the draw period is flexible allowing you to make the best use of your funds. Only in the repayment period, is the monthly payment constant and is required to be paid.

HELOC qualifications and eligibility requirements

Different lenders will have different requirements, however, the general requirements are as follows:

1. Loan-to-value (LTV) ratio less than 80%
2. Credit score greater than 620
3. Debt-to-income (DTI) ratio less than 40%

How much can I borrow with a HELOC?

In order to determine how much you can borrow from your HELOC, you calculate the maximum HELOC amount allowed which is usually up to 80% of home value, and subtract the outstanding balance. You can use our HELOC Calculator to determine the total eligible borrowing amount from your HELOC.

Should I get a HELOC?

It depends on how you plan to use the funds from the HELOC. In most cases, HELOCs are used for renovations, remodeling, and fixing the home. This helps increase the value of your home which will have long-term benefits and payoffs. However, if you use your HELOC for going on a vacation or buying luxury items, you can risk potentially losing your home if you cannot make your payments.

Advantages and Disadvantages of a HELOC

HELOC Advantages

1. Interest on a HELOC is tax-deductible
2. Borrowing can be controlled as only funds that are required need to be borrowed
3. Flexibility in repayments during the draw period
4. HELOC fees can be waived depending on the lender

HELOC Disadvantages

1. Your home will be collateral for the HELOC and missing payments may result in foreclosure
2. HELOCs have variable interest rates that are unpredictable. Variable rates are linked to a benchmark index like the prime rate which is based on the Fed funds rate and can change based on economic conditions.
3. Requires an LTV ratio of less than 80%
4. There is a risk of overspending during the draw period as only interest payments are required.