HELOC calculator, equity, room and payments.

A HELOC, a home equity line of credit, lets you borrow against the part of your home you own. This calculator works out your home equity, the most a line could add under a lender’s limit, and the payment on an amount you borrow, first interest only and then in level payments. Type the closing costs and an annual fee if you were quoted them, and it adds them to the cost and shows the yearly rate that counts the fees. It also draws the balance over time, lists it year by year and shows what a higher rate does. The limit and the rate are numbers you type: lenders set their own, and the page states none. It is maths, not advice.

How to use it

1. Type the Home value and your Mortgage balance. Add any other loan secured on the home to the balance.
2. Type the Lender’s limit (% of value). This is the share of the home’s value the lender lets you owe in total. Ask the lender for theirs.
3. Type the Amount to borrow, the Rate, the Draw years (when you pay interest only) and the Repay years.
4. If the lender quoted Closing costs or an Annual fee, type them and say whether the annual fee runs in the draw years only or in every year. Leave 0 if there are none.
5. Read the big card for the room, then the payments and the chart. The tables show a higher rate and other limits.

Equity and the limit

Equity is value minus what you owe. With a home worth 400,000 and a mortgage balance of 250,000, equity is 150,000, and you owe 62.5 percent of the value. A lender then applies a limit to the total debt against the home. At 80 percent the total allowed is 320,000, so the room for a line is 320,000 minus 250,000 = 70,000. You cannot borrow all of your equity, because the lender keeps a margin. Under 90 percent the room would be 110,000, and under 70 percent only 30,000. Those are the maths of the rows in the table under the result, not rates or rules from any lender.

The payment, step by step

Say you borrow 40,000 at an example rate of 8.5 percent, with 10 draw years and 20 repay years. In the draw period you pay interest only: 40,000 x 8.5 percent / 12 = 283.33 a month. In the repayment period the page uses level payments over 240 months at the same rate, which is 347.13 a month. Interest in all is 283.33 x 120 + 347.13 x 240 less the 40,000, or 77,311.03, if the rate never changes and the whole 40,000 is drawn on day one. After you borrow, the combined debt is 290,000, or 72.5 percent of the home’s value, which is inside the 80 percent example limit.

Adding fees

Take the same 40,000 line and add 800 of closing costs and a 50 annual fee in each of the 10 draw years. Fees come to 800 + 500 = 1,300, so the cost of borrowing is 77,311.03 + 1,300 = 78,611.03. Counting the fees, the yearly rate rises from 8.5 to about 8.79 percent. That figure treats the closing costs as taken from the money you receive and the annual fee as paid at the end of each year. A lender’s quoted APR follows its own rules, so use it only to compare quotes the lender gives you in the same way.

What a rate rise does

Each point adds 33.33 a month to the interest-only payment on 40,000 and about 25 to 27 to the repayment. Because many lines have a variable rate, the payment you start with may not be the one you end with.

HELOC or home equity loan

A home equity line of credit works like a card with a limit: you draw what you need, when you need it, and you usually pay interest only on what you have drawn. A home equity loan pays out one amount at once and is repaid in level payments. This page models a line, but you can test a loan by setting the draw years to 0 and the repay years to the loan term. Both are secured by your home, and both add to what you owe against it.

A second example: borrowing 60,000 at 9.5 percent with 10 draw years and 20 repay years. The interest-only payment is 475.00 and the repayment is 559.28. The combined debt is 310,000, which is 77.5 percent of a 400,000 home. That is inside an 80 percent limit but leaves only 10,000 of room, so a fall in the home’s value could cut access to the rest of the line.

What is not counted

• Application fees, an early closing fee, and closing costs that are rolled into the line instead of paid at the start. Type only the fees you would pay.
• Draws spread over time. The page treats the amount as drawn on the first day, which is the highest cost case for a single amount.
• A change in the home’s value. If it falls, your equity and your room shrink.
• Tax effects. Ask a tax adviser whether any interest is deductible for you.

Remember that the home secures the line. If you cannot pay, the lender may be able to take the home. For a loan that is not against a home, try the loan calculator. To see a full schedule of a mortgage, use the amortization schedule calculator. To check a purchase price, there is the how much house can I afford calculator.