About the HELOC Calculator
A HELOC — home equity line of credit — lets you borrow against the equity in your home using a revolving credit line, much like a credit card secured by your house. This HELOC Calculator answers the two questions homeowners ask first: how much can I borrow, and what will it cost each month? Enter your home value, mortgage balance, and a lender's maximum combined loan-to-value, and it returns your available equity, your HELOC credit limit, the interest-only payment during the draw period, and the fully-amortizing payment once repayment begins. Pair it with the Home Affordability Calculator to keep your total housing debt in check.
How Your HELOC Limit Is Calculated
Lenders don't let you borrow against every dollar of equity. Instead they cap your combined loan-to-value (CLTV) — all the debt secured by the home divided by the home's value — usually at 80% to 90%. Your borrowing power is that cap minus what you still owe:
Available Equity = Home Value − Mortgage Balance
Max Total Debt = Home Value × Max CLTV
HELOC Limit = Max Total Debt − Mortgage Balance
Notice that your HELOC limit is smaller than your available equity — the gap is the cushion the lender keeps to protect against a drop in home values.
The Two Phases of a HELOC
Every HELOC runs in two stages, and each has a very different payment:
- Draw period (typically 10 years): you can borrow, repay, and re-borrow up to your limit. Most lenders require only interest-only payments on the balance you've drawn, so payments stay low but the balance doesn't shrink.
- Repayment period (often 10–20 years): the line closes to new borrowing and the balance fully amortizes — your payment jumps to cover principal plus interest so the loan is paid off by the end of the term.
The interest-only draw payment depends only on your balance and rate, not on the draw length, which is why extending the draw period doesn't lower that payment — it just delays when principal repayment begins.
Formula Used
The interest-only draw payment is simply the monthly interest on the balance:
Draw Payment = Balance × (Annual Rate ÷ 12)
The repayment payment uses the standard amortization formula over the repayment term:
M = P × [r(1+r)ⁿ] / [(1+r)ⁿ − 1]
Where P = balance borrowed, r = monthly rate (annual ÷ 12 ÷ 100), and n = repayment months (years × 12).
Worked Example
Say your home is worth $500,000, you owe $300,000 on your mortgage, your lender allows an 85% CLTV, and the HELOC rate is 8.5% with a 10-year draw and a 20-year repayment. Borrowing the full line:
Available equity = 500,000 − 300,000 = $200,000
Max total debt = 500,000 × 0.85 = $425,000
HELOC limit = 425,000 − 300,000 = $125,000
Draw payment = 125,000 × (0.085 ÷ 12) ≈ $885.42 / mo (interest-only)
Repayment payment = amortize 125,000 @ 8.5% over 240 mo ≈ $1,084.78 / mo
Combined LTV = (300,000 + 125,000) ÷ 500,000 = 85%
The payment more than doubles — from about $885 during the draw period to roughly $1,085 once repayment starts — even though the balance never changed. That "payment shock" is the single most important thing to plan for before you draw on a HELOC.
How Much You Can Borrow at Different CLTV Caps
Using the same $500,000 home and $300,000 mortgage, here's how the lender's CLTV cap changes your borrowing power:
| Max Combined LTV | Max Total Debt | HELOC Limit |
|---|
| 80% | $400,000 | $100,000 |
| 85% | $425,000 | $125,000 |
| 90% | $450,000 | $150,000 |
HELOC vs. Home Equity Loan vs. Cash-Out Refinance
All three tap your equity, but they suit different needs:
- HELOC — a revolving, usually variable-rate line you draw on as needed. Best for ongoing or uncertain costs (a phased renovation, a standby reserve) where you don't want to borrow it all at once.
- Home equity loan — a fixed-rate lump sum with fixed payments from day one. Best when you know the exact amount you need and want payment certainty.
- Cash-out refinance — replaces your first mortgage with a larger one and hands you the difference in cash. Best when you can also improve your mortgage rate; otherwise it resets your loan. Compare that path with the Mortgage Refinance Calculator.
Common Mistakes to Avoid
- Ignoring the payment shock. Budgeting only for the low interest-only payment leaves you unprepared when repayment doubles it. Plan for the repayment figure above from the start.
- Forgetting the rate is variable. Most HELOCs move with the prime rate. Stress-test your payment at a rate 2–3 points higher than today's before you commit.
- Borrowing to the limit "because it's there." Your home is the collateral — draw only what you have a clear plan to repay.
- Treating equity as free money. Every dollar you borrow is debt against your home and reduces your net proceeds when you sell.
Disclaimer
This tool provides general estimates for informational purposes only and is not financial advice. Actual HELOC limits, rates, fees, draw and repayment terms, and CLTV caps vary by lender and are subject to underwriting and appraisal. Most HELOCs carry variable rates, so real payments will change over time. Confirm all figures with your lender before borrowing. To keep your overall housing costs sustainable, use the Home Affordability Calculator, and to check whether a cash-out refinance might beat a HELOC, use the Mortgage Refinance Calculator.
Frequently Asked Questions
How much can I borrow with a HELOC?Most lenders let your total mortgage debt reach 80%–90% of your home's value (the combined loan-to-value, or CLTV). Your HELOC limit is that cap minus what you still owe on your first mortgage. For example, at an 85% max CLTV on a $500,000 home with a $300,000 mortgage, total debt can reach $425,000, so your HELOC limit is about $125,000. This calculator does that math for you — enter your home value, balance, and the lender's max CLTV.
What is the difference between available equity and my HELOC limit?Available equity is simply your home's value minus your mortgage balance — the full ownership stake you've built. Your HELOC limit is smaller, because lenders won't let you borrow against 100% of your equity. They cap your combined loan-to-value (often 80%–90%), so a portion of your equity stays as a cushion. On a $500,000 home with a $300,000 mortgage you have $200,000 of equity but, at 85% CLTV, only about $125,000 of borrowing power.
How does the draw period work?A HELOC has two phases. During the draw period (typically 10 years) you can borrow, repay, and re-borrow up to your limit like a credit card, and lenders usually require only interest-only payments on the amount you've drawn. When the draw period ends, you enter the repayment period (often 10–20 years), during which you can no longer borrow and your payment jumps to cover both principal and interest so the balance is paid off by the end of the term.
Why does my payment jump after the draw period?During the draw period you typically pay only the interest, which keeps payments low but doesn't reduce your balance. When repayment begins, that entire balance must amortize over the remaining term, so the payment rises to include principal. This calculator shows both figures side by side — the low interest-only draw payment and the higher repayment payment — so the 'payment shock' doesn't surprise you.
Is a HELOC rate fixed or variable?Most HELOCs carry a variable rate tied to the prime rate plus a margin, so your payment can rise or fall as rates change. Some lenders offer a fixed-rate option to lock in a portion of your balance. Because the rate can move, it's wise to stress-test your payment at a higher rate than today's — re-run this calculator with a rate 2–3 points higher to see whether you could still afford it.
HELOC vs. home equity loan vs. cash-out refinance — which is right?A HELOC is a revolving line you draw on as needed at a variable rate — best for ongoing or uncertain costs. A home equity loan is a lump sum at a fixed rate with fixed payments — best when you know the exact amount you need. A cash-out refinance replaces your whole first mortgage with a larger one; it can make sense if you can also lower your mortgage rate, but it resets your loan. To compare a cash-out path, try the Mortgage Refinance Calculator.
What can I use a HELOC for?Common uses include home renovations, consolidating higher-interest debt, education costs, or as a standby emergency reserve. Interest may be tax-deductible when the funds are used to buy, build, or substantially improve the home that secures the loan (check current IRS rules and consult a tax professional). Because your home is the collateral, avoid using a HELOC for discretionary spending you can't comfortably repay.
Does a HELOC affect my ability to sell or refinance?Yes. A HELOC is a lien on your home, so when you sell, the outstanding balance is paid off from the proceeds along with your first mortgage. If you refinance your first mortgage, the HELOC lender usually must agree to stay in second position (a 'subordination'), or you pay the HELOC off as part of the refinance. Neither prevents a sale or refinance — they just have to be settled at closing.