How this calculator works
A home equity line of credit is secured against your home and normally has two phases. During the draw period you can borrow, repay and borrow again, and most lenders require interest-only payments on the outstanding balance. When the draw period ends the balance is frozen and amortised over the repayment period, which raises the monthly payment sharply. This calculator assumes the full amount is drawn at the start and held for the whole draw period, so the interest shown is an upper bound on what an untouched credit line would cost. The rate is assumed to stay fixed; real lines of credit are usually variable and priced against the lender prime rate.
Formula
i = annual rate / 12. Draw payment = balance × i, paid each month during the draw period, so draw interest = balance × annual rate × draw years. Repayment payment A = balance × i / (1 - (1 + i)^(-n)) with n = repayment years × 12. Repayment interest = n × A - balance. Fees = balance × setup percentage + annual fee × total years.
Worked example
A $100,000 draw at 6.5% has a draw-period payment of $541.67 a month, costing $32,500.00 of interest over 5 years. Repayment over 15 years costs $871.11 a month and $56,799.33 of interest. Setup and annual fees come to $3,000.00, so the credit line costs $92,299.33 in total and the payment rises by $329.44 when the draw period ends.
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Frequently asked questions
Can I borrow more during the draw period?
Usually yes, up to the approved limit. This model assumes the amount is drawn at once and not repaid during the draw period; paying down the balance during the draw reduces both interest and the later repayment.
What if the balance is not repaid by the end of the draw?
Most lines convert to a repayment schedule or require a lump sum. This calculator models the common amortising repayment over the stated years.
Is the interest rate fixed?
HELOC rates are typically variable and change with the lender prime rate. The estimate holds one rate constant, so treat it as a scenario rather than a forecast.
What happens to my home if I cannot pay?
The line is secured by your home, so default can lead to a power of sale or foreclosure. A HELOC should be used with a clear plan for repayment.