What is the HELOC?
A HELOC is a revolving credit line secured against your home. Lenders typically allow a combined loan-to-value of 80–90%, so your line is that limit minus your existing mortgage.
HELOCs have two phases: a draw period (usually 10 years) with interest-only payments, then a repayment period where the balance amortises — and payments can jump sharply.
Formula & worked example
Draw payment = Balance × rate / 12 (interest only)
Worked example: a 500,000 home with a 280,000 mortgage at 85% CLTV gives a line of 145,000. Drawing 60,000 at 8.5% costs 425 a month interest-only — but once the repayment period begins over 20 years, the payment rises to about 521 and total interest reaches roughly 65,000.
How to use this heloc calculator
- Enter your home value and current mortgage balance.
- Set the maximum CLTV your lender allows — usually 80–90%.
- Enter how much you plan to actually draw.
- Compare the interest-only payment against the repayment-period payment.
Smart tips
- HELOC rates are usually variable and tied to prime. Budget for rates rising.
- The payment shock at the end of the draw period catches many borrowers out — plan for it from day one.
- Your home is collateral. Never use a HELOC for consumption you cannot repay.
- Interest may be deductible if the funds are used to buy, build or substantially improve the home.
- A HELOC is often cheaper than a personal loan or credit card, but the risk is far higher.
Frequently asked questions
How much can I borrow with a HELOC?
Typically up to 80–90% of your home value minus your mortgage balance, subject to income and credit checks.
What happens at the end of the draw period?
The line closes to new draws and the balance amortises over the repayment period, usually causing a significant payment increase.
Is HELOC interest tax deductible?
Potentially, if the funds are used to buy, build or substantially improve the home securing the loan. Consult a tax professional.
HELOC or home equity loan?
A HELOC is revolving with a variable rate and flexible draws. A home equity loan is a fixed-rate lump sum with fixed payments.
Want the theory behind the numbers? Read our home equity guides on the Money Blog.