# HELOC and home equity calculator

> Home equity you can borrow at your lender's CLTV limit, and HELOC payments in the interest-only draw period and the repayment period, or a fixed home equity loan.

Interactive version: https://www.calcopenly.com/finance/home-equity-loan-calculator
Subject: Finance calculators

Lenders cap what you can borrow against a home at a percentage of its value, the combined loan-to-value (CLTV) limit, minus what you still owe on the mortgage. A home equity line of credit (HELOC) then runs in two phases: in the draw period you pay only interest on what you have borrowed, and in the repayment period the balance is paid off in equal monthly payments. A home equity loan is repaid in equal payments from the start.

With the defaults, a 500,000 home with 300,000 owed and an 85% limit supports up to 125,000. Drawing 50,000 at 8.5% costs 354.17 a month through the 10-year draw period, then 433.91 a month for the 20 years after it.

HELOC rates are typically variable (Federal Reserve); set a different rate for the repayment period under More options to test a rise. The calculator assumes the full amount is drawn on day one and charges the annual rate ÷ 12 each month.

## Inputs

- **Borrow with** (options: HELOC (line of credit), Home equity loan)
- **Home value**: The appraised value the lender will use.
- **Mortgage balance owed**
- **Lender's maximum combined LTV**: Mortgage plus the new loan as a share of the home's value. Lenders set their own limit; ask yours.
- **Amount to borrow**
- **Interest rate (per year)**
- **Draw period**
- **Repayment period**
- **Loan term**
- **Rate in the repayment period**: HELOC rates are typically variable; enter a higher rate to see the payment if rates rise.
- **Closing costs**
- **Annual fee**: Charged each year of the draw period.

## Results

- Borrowing limit — main result
- Home equity
- Equity share of the value
- Mortgage loan-to-value now
- Combined LTV after borrowing
- Payment in the draw period (interest only)
- Payment in the repayment period
- Increase when repayment starts
- Monthly payment
- Total interest
- Interest and fees

## Formula

$$
\text{limit} = V\times \text{CLTV} - B,\qquad P_{\text{draw}} = A\,\frac{r}{12},\qquad P_{\text{repay}} = \frac{A\,i\,(1+i)^{m}}{(1+i)^{m}-1}
$$

## Worked examples

### Federal Reserve credit-limit example

- Borrow with: HELOC (line of credit)
- Home value: 100,000
- Mortgage balance owed: 40,000
- Lender's maximum combined LTV: 75%
- Amount to borrow: 10,000
- Interest rate (per year): 10%
- Draw period: 10 years
- Repayment period: 20 years
- **Borrowing limit: 35,000.00**
- **Home equity: 60,000.00**
- **Payment in the draw period (interest only): 83.00**
- Checked against: Federal Reserve Board, What you should know about home equity lines of credit: 100,000 × 75% − 40,000 = 35,000; 10,000 interest-only at 10% ≈ 83 a month

### Federal Reserve example after the rate rises to 15%

- Borrow with: HELOC (line of credit)
- Home value: 100,000
- Mortgage balance owed: 40,000
- Lender's maximum combined LTV: 75%
- Amount to borrow: 10,000
- Interest rate (per year): 15%
- Draw period: 10 years
- Repayment period: 20 years
- **Payment in the draw period (interest only): 125.00**
- Checked against: Federal Reserve Board HELOC booklet: the same 10,000 interest-only at 15% costs 125 a month

### Default HELOC: 50,000 at 8.5%, 10-year draw, 20-year repayment

- Borrow with: HELOC (line of credit)
- Home value: 500,000
- Mortgage balance owed: 300,000
- Lender's maximum combined LTV: 85%
- Amount to borrow: 50,000
- Interest rate (per year): 8.5%
- Draw period: 10 years
- Repayment period: 20 years
- **Borrowing limit: 125,000.00**
- **Combined LTV after borrowing: 70.00%**
- **Payment in the draw period (interest only): 354.17**
- **Payment in the repayment period: 433.91**
- **Increase when repayment starts: 79.74**
- **Total interest: 96,638.79**
- Checked against: Python decimal: 50,000 × 0.085/12; annuity over 240 months at 0.085/12; total interest = 120 × 354.1667 + 240 × 433.9116 − 50,000

### 15-year home equity loan at 8.5%

- Borrow with: Home equity loan
- Home value: 500,000
- Mortgage balance owed: 300,000
- Lender's maximum combined LTV: 85%
- Amount to borrow: 50,000
- Interest rate (per year): 8.5%
- Loan term: 15 years
- **Monthly payment: 492.37**
- **Total interest: 38,626.56**
- **Payment in the draw period (interest only): not applicable**
- Checked against: Python decimal annuity: 50,000 at 0.085/12 over 180 months = 492.3698; interest = 180 × payment − 50,000

### Rate rises in the repayment period

- Borrow with: HELOC (line of credit)
- Home value: 400,000
- Mortgage balance owed: 200,000
- Lender's maximum combined LTV: 80%
- Amount to borrow: 100,000
- Interest rate (per year): 7.5%
- Draw period: 10 years
- Repayment period: 15 years
- Rate in the repayment period: 9.5%
- **Borrowing limit: 120,000.00**
- **Payment in the draw period (interest only): 625.00**
- **Payment in the repayment period: 1,044.22**
- **Total interest: 162,960.44**
- Checked against: Python decimal: interest-only 100,000 × 0.075/12 for 120 months, then an annuity at 0.095/12 over 180 months

### Mortgage already above the CLTV limit

- Borrow with: HELOC (line of credit)
- Home value: 500,000
- Mortgage balance owed: 450,000
- Lender's maximum combined LTV: 85%
- Amount to borrow: 20,000
- Interest rate (per year): 8.5%
- Draw period: 10 years
- Repayment period: 20 years
- **Borrowing limit: 0.00**
- **Home equity: 50,000.00**
- **Combined LTV after borrowing: 94.00%**
- Checked against: Hand calculation: 85% × 500,000 = 425,000 is less than the 450,000 owed, so there is no room to borrow

## Questions

### How much can I borrow against my home?

Multiply the home's appraised value by the lender's maximum combined loan-to-value and subtract the mortgage balance. The Federal Reserve's example: 75% of a 100,000 home is 75,000, less 40,000 owed, leaves a 35,000 line. At an 85% limit, a 500,000 home with 300,000 owed supports 125,000. The lender also checks your income, debts and credit before setting the final limit.

### How is a HELOC payment calculated?

During the draw period an interest-only payment is the balance times the annual rate ÷ 12. The Federal Reserve's example: 10,000 at 10% costs 83 a month, rising to 125 if the rate reaches 15%. In the repayment period the balance is amortized like a mortgage: 50,000 at 8.5% over 20 years costs 433.91 a month.

### What happens when the HELOC draw period ends?

You stop borrowing and start repaying principal, so the payment rises even if the rate does not. On 50,000 at 8.5%, the interest-only 354.17 becomes 433.91 over a 20-year repayment period, 22.5% more. Some plans instead require the whole balance at once as a balloon payment, which you would have to refinance or pay (Federal Reserve).

### Is a HELOC or a home equity loan cheaper?

At the same rate, the loan that repays principal sooner costs less interest. Borrowing 50,000 at 8.5%, a 15-year home equity loan costs 492.37 a month and 38,626.56 in interest; a HELOC with 10 interest-only years and 20 repayment years costs 96,638.79. The HELOC's advantage is flexibility: you pay interest only on what you draw.

### How accurate is the HELOC and home equity calculator?

Accuracy depends on your inputs and the method's assumptions. Decimal arithmetic uses 50 significant digits, but estimates, numerical methods and source data can be less precise; the displayed rounding does not remove those limits. It is checked against 6 worked examples whose answers come from independent sources; for example, “Federal Reserve credit-limit example” is checked against Federal Reserve Board, What you should know about home equity lines of credit: 100,000 × 75% − 40,000 = 35,000; 10,000 interest-only at 10% ≈ 83 a month.

### Where does the method come from?

Federal Reserve Board — What you should know about home equity lines of credit; Consumer Financial Protection Bureau — What is a home equity line of credit (HELOC)?; Microsoft Excel PMT function.

## Sources

- [Federal Reserve Board — What you should know about home equity lines of credit](https://www.govinfo.gov/content/pkg/GOVPUB-FR-PURL-gpo25639/pdf/GOVPUB-FR-PURL-gpo25639.pdf)
- [Consumer Financial Protection Bureau — What is a home equity line of credit (HELOC)?](https://www.consumerfinance.gov/ask-cfpb/what-is-a-home-equity-line-of-credit-heloc-en-107/)
- [Microsoft Excel PMT function](https://support.microsoft.com/office/pmt-function-0214da64-9a63-4996-bc20-214433fa6441)

_Note: financial information, not professional advice._