Calculate your Home Equity Line of Credit payments, available credit, and compare draw vs repayment periods.
| Phase | Duration | Monthly Payment | Total Paid |
|---|---|---|---|
| Draw Period (Interest-Only) | 10 years | $708 | $84,960 |
| Repayment Period | 20 years | $868 | $208,320 |
| Total | 30 years | -- | $293,280 |
| Feature | HELOC | Home Equity Loan |
|---|
| Year | Phase | Payment | Interest | Principal | Balance |
|---|
A Home Equity Line of Credit (HELOC) is a revolving credit line secured by your home's equity. You can borrow, repay, and borrow again during the draw period, similar to a credit card but with lower rates.
The draw period (typically 5-10 years) allows you to access funds with interest-only payments. The repayment period (10-20 years) requires full principal and interest payments.
Most HELOCs have variable rates tied to the Prime Rate. Your rate = Prime + Margin. When the Fed raises rates, your HELOC payment increases accordingly.
Combined Loan-to-Value (CLTV) = (Mortgage + HELOC) / Home Value. Most lenders limit CLTV to 80-85%, though some go to 90% for qualified borrowers.
HELOCs offer flexibility with variable rates and revolving access. Home Equity Loans provide a lump sum with fixed rates and payments. Choose based on your borrowing needs.
Your home secures the HELOC. Variable rates can increase payments significantly. Interest-only payments don't build equity. Consider your ability to handle rate increases.
Most lenders allow you to borrow up to 80-85% of your home's value minus your current mortgage balance. For example, if your home is worth $400,000 and you owe $200,000, you may qualify for up to $140,000 at 85% CLTV ($400,000 × 0.85 - $200,000).
Most lenders require a minimum credit score of 620-680 for a HELOC. Higher scores (720+) typically qualify for the best rates. Lenders also consider your debt-to-income ratio, typically requiring it to be below 43-50%.
Under the Tax Cuts and Jobs Act, HELOC interest is deductible only if the funds are used to "buy, build, or substantially improve" your home. Interest on HELOC funds used for other purposes (debt consolidation, education, etc.) is not deductible. Consult a tax professional for your specific situation.
When the draw period ends, you can no longer borrow from the credit line. You enter the repayment period where you must pay both principal and interest, typically over 10-20 years. This significantly increases your monthly payment since you're now paying down the balance.
Yes, you can typically pay off your HELOC early without penalty during the draw period. However, some lenders may charge prepayment penalties if you close the line within the first 2-3 years. Check your loan terms and ask about early closure fees.