HELOC Calculator

A Home Equity Line of Credit is a revolving second mortgage with two distinct phases. The first is a draw period (usually 10 years) where you can borrow up to your credit limit and pay interest only on what you have drawn. Principal is not required, so the monthly payment is low but the balance does not shrink. The second is a repayment period (usually 20 years) where the line closes to new draws and the outstanding balance amortizes into fixed principal-plus-interest payments. A 10/20 HELOC therefore behaves like an interest-only loan for the first decade, then a 20-year amortizing loan for the second.

Most US HELOCs are priced as the prime rate plus a lender margin (commonly 1 to 3 percentage points). The prime rate moves in lockstep with the Federal Reserve's target federal funds rate, so when the Fed hikes rates, your HELOC payment goes up within one or two billing cycles. In 2022 and 2023, prime climbed from 3.25% to 8.50% in under 18 months, which roughly doubled HELOC payments for existing borrowers. Lenders usually publish a lifetime cap (often 18%) but no monthly ceiling, so the variable rate is the single biggest risk in a HELOC.

Combined loan-to-value is the sum of all liens against your home (first mortgage plus HELOC) divided by the appraised value. Most lenders cap CLTV at 80%, a few stretch to 85%, and a handful go to 90% for borrowers with very strong credit. On a $500,000 home with a $300,000 first mortgage, the 80% rule allows a maximum HELOC of $100,000 (80% of $500k = $400k, minus the $300k first lien). Going above this ceiling is rare and typically carries a higher rate plus mortgage insurance, which is why this calculator rejects a credit limit above the 80% CLTV cap.

Payment shock is the jump from the low interest-only payment during the draw period to the fully amortizing principal-plus-interest payment in the repayment period. On a $50,000 balance at 9.5%, the draw-period payment is about $396 per month (interest only). When the 20-year repayment phase begins, that same balance amortizes to roughly $466 per month, an 18% jump. With a higher balance or a rate hike during the draw period, the shock can be far worse: many borrowers in 2024 saw payments double or triple when their draw period ended. The repayment phase is also when the principal finally starts shrinking, which is why the math works out the way it does.

A HELOC is secured by your home, exactly like your first mortgage. If you miss enough payments, the HELOC lender can foreclose. That is the case even if you are completely current on your first mortgage: a HELOC default is grounds for foreclosure on its own. In practice, lenders usually try a workout first (forbearance, modification, or refinance into a home equity loan with a fixed payment), but the legal remedy is the same. This is why a HELOC is best reserved for emergencies, home improvements that build equity, or short-term bridge financing, and not for vacations, weddings, or routine consumer spending.