Home Equity Loan & HELOC Calculator
Calculate available home equity, then model either a fixed home equity loan or a HELOC's draw-period and repayment-period payments.
How to use this calculator
- 1Enter your home value and existing mortgage balance to see available equity.
- 2Choose a home equity loan for a fixed lump sum, or a HELOC to see both the draw-period and repayment-period payments.
How the calculation works
Available equity = (Home value × Max LTV) − Existing mortgage. HELOC draw-period payment = Drawn amount × monthly rate (interest only)- Max LTV
- The lender's ceiling on total borrowing against the home, as a share of its value
- Draw period
- The years a HELOC allows interest-only payments and further borrowing
A home equity loan behaves exactly like the Loan Calculator — a fixed amount, fixed rate, fixed payment. A HELOC is structurally different: it has two distinct phases, and the payment shock moving from interest-only to fully amortizing catches many borrowers off guard if they have not planned for it.
Worked example
$450,000 home, $220,000 mortgage, $40,000 HELOC at 9%
- 1.Available equity: ($450,000 × 80%) − $220,000 = $360,000 − $220,000 = $140,000 — comfortably above the $40,000 drawn.
- 2.Draw-period payment: $40,000 × (9% ÷ 12) = $300.00 a month, interest only.
- 3.Repayment-period payment: $40,000 amortized over 15 years at 9% ≈ $405.71 a month.
Result: $300.00/month during the draw period, then ≈$405.71/month for 15 years
What home equity actually is
Home equity is simply the gap between what a home is worth and what is still owed against it. It builds up two ways: passively, as regular mortgage payments reduce the loan balance, and separately as the property itself appreciates in value — either can move equity without the other, which is why equity can shrink even for a homeowner who never misses a payment, if local values fall.
Borrowing against that equity does not touch the original mortgage — it adds a second, separate debt secured by the same property, which is why lenders cap total borrowing well below the home’s full value rather than lending against 100% of it.
Two very different ways to borrow against it
Both products borrow against the same equity, but they are structured almost oppositely.
- Home equity loan — a lump sum handed over at closing, with a fixed rate and a fixed payment for the whole term — functionally a second mortgage, best suited to a single known expense.
- HELOC — a revolving credit line, similar to a credit card, that can be drawn from repeatedly during a set draw period, usually with interest-only payments, before converting to a fixed repayment schedule — better suited to ongoing or uncertain costs.
What a lender is actually weighing
Approval and pricing for either product come down to a small set of factors, all aimed at the same question: how much cushion exists if property values fall.
- Combined loan-to-value — the existing mortgage plus the new borrowing, measured against the home’s current value — the single biggest factor in how much can be borrowed at all.
- Credit history — as with any loan, a stronger credit profile generally earns a lower rate and easier approval.
- Debt-to-income ratio — lenders check that the new payment fits alongside existing debts and income, not just that the collateral supports the loan.
What it is commonly used for — and the risk that comes with all of it
Because the rate is typically far lower than a personal loan or credit card, home equity borrowing is a popular way to fund home improvements, consolidate higher-interest debt, or cover a large, irregular expense. The trade-off that is easy to lose sight of is what secures the debt: unlike a credit card or personal loan, missing payments on a home equity loan or HELOC risks foreclosure, not just damaged credit, because the home itself is the collateral.
How the HELOC became a mainstream product
Borrowing against home equity is an old idea, but it stayed a niche product until the Tax Reform Act of 1986 eliminated the tax deduction for interest on most other consumer debt — car loans, credit cards, personal loans — while preserving it for debt secured by a home. Lenders and homeowners both noticed, and HELOCs went from an obscure banking product to a mainstream way to finance everything from renovations to college tuition within a few years, a shift that still shapes how home equity borrowing is marketed and used today.
What this assumes, and where it stops
Assumptions
- For the HELOC, the full amount is drawn immediately and left untouched — real HELOCs allow flexible borrowing and repayment throughout the draw period.
Limitations
- HELOC rates are usually variable, tracking an index like the prime rate — this models a constant rate for simplicity, but your real payment will move with market rates.
- Does not include closing costs, annual fees, or early-closure fees that some HELOCs and home equity loans charge.
Common questions
What is the difference between a home equity loan and a HELOC?
A home equity loan gives you one lump sum upfront with a fixed rate and fixed payment, like a second mortgage. A HELOC is a revolving credit line you can draw from as needed during the draw period — typically paying interest only — before it converts to a fixed repayment schedule. Choose a loan for a known, one-time expense; a HELOC for ongoing or uncertain borrowing needs.
Why does the HELOC payment jump so much after the draw period?
During the draw period you are only paying the interest, so the principal balance never shrinks. Once repayment begins, the lender needs to fully pay off that same principal over a much shorter remaining window, which is why the payment increase can be substantial — planning for this transition ahead of time avoids an unpleasant surprise.
Sources
- What is a home equity line of credit (HELOC)? — US Consumer Financial Protection Bureau
Formula and content last reviewed on .
Results are estimates for information only, not professional advice.
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