HELOC Calculator

The HELOC maths, explained

A home equity line of credit is a revolving credit line secured against your property. Two calculations decide what it costs you: how much credit the lender will extend, and what the payment becomes when the interest-only draw period ends.

Step 1 — how much credit you can access

Available credit = (home value × max LTV) − first mortgage balance

home value          = current appraised value
max LTV             = lender ceiling, usually 80% – 90%
first mortgage      = outstanding balance, not the original loan

This is the combined loan-to-value test described in the OCC Comptroller's Handbook on home equity lines of credit. The lender is not lending against the whole house — it is lending against the slice of equity that sits above the first mortgage, and only up to a ceiling it is willing to expose itself to.

Step 2 — the interest-only draw payment

Draw payment = drawn amount × (annual rate ÷ 12)

No principal is repaid, so the balance stays flat
for the whole draw period.

During the draw period you can borrow, repay and re-borrow up to your limit. Because the payment covers interest only, the balance does not fall. A $100,000 draw at 8.5% costs $708.33 a month and, after ten years of draw, you still owe $100,000.

Step 3 — the amortising repayment payment

M = P × [ i(1 + i)^n ] ÷ [ (1 + i)^n − 1 ]

P = drawn balance at the end of the draw period
i = monthly rate (annual rate ÷ 12)
n = repayment period in months

This is the standard amortising payment formula from Regulation Z Appendix J. The same $100,000 at 8.5% over a 20-year repayment period costs $867.82 a month — and unlike the draw payment, every month chips away at the principal until the balance reaches zero.

Step 4 — the payment jump

Payment jump = repayment payment − draw payment
Jump %       = payment jump ÷ draw payment × 100

This is the number that catches borrowers out. The draw payment is the smallest the loan will ever be; the repayment payment is what you will actually pay for the second half of the loan's life. If you cannot afford the repayment figure today, you cannot afford the HELOC.

Worked examples

United States — $650,000 home, $280,000 first mortgage, 85% LTV

The ceiling is 85% of $650,000, or $552,500. Subtracting the $280,000 first mortgage leaves $272,500 of available credit. Drawing $100,000 at 8.5% costs $708.33 a month during a 10-year draw period. When the draw ends and the balance converts to a 20-year repayment, the payment rises to $867.82 — a jump of $159.49, or 23%.

United States — the same draw on a 10-year repayment

Shortening the repayment period to 10 years raises the payment to $1,239.86 a month — a 75% jump over the draw payment. The total interest falls sharply, but only if you can carry the higher payment. This is the trade-off the repayment-period selector is designed to expose.

United Kingdom — releasing £80,000 of equity

A UK homeowner with a £500,000 property and a £180,000 mortgage has £320,000 of equity. A lender working to 80% LTV will extend up to £400,000 in total, leaving £220,000 of headroom. Borrowing £80,000 at 6.5% on an interest-only basis costs £433.33 a month; converting to a 15-year repayment raises that to £696.94. UK lenders must assess affordability under FCA MCOB 11 rules before agreeing the line.

How to use this calculator

1. Enter your home value — use a recent appraisal or a lender's automated valuation.
2. Enter the first mortgage balance, not the original loan amount.
3. Choose the maximum combined LTV your lender works to — 80%, 85% or 90%.
4. Set the amount you want to draw. The calculator caps it at your available credit line.
5. Enter the HELOC rate and pick the draw and repayment periods.
6. Compare the draw-period payment with the repayment payment and make sure you can afford the higher one.