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.
Your equity is $200,000.00, and with a combined limit of 85% a lender could let you borrow up to $125,000.00. At 8.5%, drawing $50,000.00 costs $354.17 a month while you pay interest only, then $433.91 a month once repayment starts; interest over the life of the loan comes to $96,638.79.
Your home's value
Mortgage balance60.0%This loan10.0%Unused borrowing room15.0%Equity the lender won't lend against15.0%
Monthly payment
Balance owed on this loan
Year-by-year schedule Rows: 30
Year
Phase
Payments
Interest
Principal
Balance at year end
1
Draw (interest only)
$4,250.00
$4,250.00
$0.00
$50,000.00
2
Draw (interest only)
$4,250.00
$4,250.00
$0.00
$50,000.00
3
Draw (interest only)
$4,250.00
$4,250.00
$0.00
$50,000.00
4
Draw (interest only)
$4,250.00
$4,250.00
$0.00
$50,000.00
5
Draw (interest only)
$4,250.00
$4,250.00
$0.00
$50,000.00
6
Draw (interest only)
$4,250.00
$4,250.00
$0.00
$50,000.00
7
Draw (interest only)
$4,250.00
$4,250.00
$0.00
$50,000.00
8
Draw (interest only)
$4,250.00
$4,250.00
$0.00
$50,000.00
9
Draw (interest only)
$4,250.00
$4,250.00
$0.00
$50,000.00
10
Draw (interest only)
$4,250.00
$4,250.00
$0.00
$50,000.00
11
Repayment
$5,206.94
$4,211.82
$995.11
$49,004.89
12
Repayment
$5,206.94
$4,123.87
$1,083.07
$47,921.81
How it's calculated S
Home equity
500,000.00−300,000.00=200,000.00
Borrowing limit
500,000.00×85%−300,000.00=125,000.00
The lender also checks income, debts and credit before approving this amount.
Draw period payment (interest only)
50,000.00×128.5%=354.17
Paid for 120 months; the balance stays at $50,000.00. Lenders that charge daily interest bill slightly more in 31-day months.
Repayment period payment
(1+i)240−150,000.00×i(1+i)240=433.91,i=12008.5
The payment rises by $79.74 when the draw period ends.
Total interest
96,638.79
About the HELOC and home equity calculator
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.
How much can you borrow against your home?
Multiply your home's value by the lender's maximum combined loan-to-value (CLTV) and subtract what you still owe. A $500,000 home with a $300,000 mortgage and an 85% limit supports up to 500,000 × 0.85 − 300,000 = $125,000. The lender then checks income, debts and credit before setting the actual amount.
You have $200,000 of equity in that example, but the limit keeps $75,000 of it out of reach. Lenders set their own CLTV limit, so ask yours; 85% is only an example.
The Federal Reserve's HELOC booklet works the same sum: 75% of a $100,000 home is $75,000, and with $40,000 owed that leaves a $35,000 line (Federal Reserve).
How HELOC payments work
A home equity line of credit (HELOC) runs in two phases. During the draw period you pay only interest: balance × annual rate ÷ 12. Drawing $50,000 at 8.5% costs 50,000 × 0.085 ÷ 12 = $354.17 a month through a 10-year draw.
In the repayment period the balance is paid off in equal monthly payments, like a mortgage. Over 20 years at the same 8.5%, the payment rises to $433.91, $79.74 more even though the rate has not changed.
In the Federal Reserve's example, $10,000 interest-only at 10% costs about $83 a month, rising to $125 if the rate reaches 15%. Some plans instead require the whole balance in one balloon payment when the draw period ends.
HELOC vs home equity loan
A home equity loan pays out once and is repaid in equal monthly payments from the start. Borrowing the same $50,000 at 8.5%, a HELOC with a 10-year draw and 20-year repayment compares with a 15-year loan like this:
Scenario
Draw payment
Repayment payment
Total interest
Default
354.17
433.91
96638.79
Equity loan
0.00
492.37
38626.56
Higher repayment rate
354.17
482.51
108302.60
The loan has no draw phase, hence the zero. The HELOC costs two and a half times the interest because the full $50,000 stays outstanding through ten interest-only years.
The third row is the HELOC with its rate rising to 10% when repayment starts. The payment then jumps by $128.34 instead of $79.74. The HELOC's advantage is flexibility: you pay interest only on what you have drawn.
After borrowing: combined LTV
Your combined loan-to-value is all debt on the home divided by its value. Borrowing $50,000 on top of $300,000 takes it from 60% to 350,000 ÷ 500,000 = 70%, inside the 85% limit.
Rates and fees
HELOC rates are typically variable, so test a higher repayment-period rate before counting on today's payment. Fees add up too: $1,000 of closing costs and a $75 annual fee over the 10-year draw add $1,750 to the default HELOC.
Common mistakes
Treating the limit as an approval. It is arithmetic on the value and the balance; the lender decides the line.
Budgeting on the interest-only payment. It lasts only as long as the draw period.
Assuming the rate stays put. A variable rate can raise both phases' payments.
Drawing everything on day one without needing it. These figures assume a full draw; with a real HELOC you pay interest only on what you take.
Forgetting what secures the debt. The home is the collateral for both a HELOC and a home equity loan.
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: 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: annuity: 50,000 at 0.085/12 over 180 months = 492.3698; interest = 180 × payment − 50,000
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.
For planning only. Lenders, tax authorities and markets apply their own rounding, fees and rules; confirm figures with them before you commit.
Checked against references
This calculator includes 6 worked examples with independently sourced answers. They run in the test suite, and you can run them here too.
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