A Home Equity Line of Credit, or HELOC, is a very popular type of loan. But figuring out the payments can be a challenge. Most start out as interest-only loans during the draw period, the first 5-10 years when you can borrow against your line of credit. But if you don’t repay any loan principle during that time, you could be hit with some whopping monthly payments when you have to start repaying the loan when the draw period ends. This Home Equity Line of Credit payments calculator is designed to help you figure out how much you can reduce your loan balance by paying a big extra each month during the draw period. That way, you can see what you need to do to bring down your balance down to a manageable level once the mandatory repayment phase begins, or how quickly you can pay off the loan principle entirely.
What does this calculator do?
This Home Equity Line of Payments Calculator can perform a variety of calculations related to a HELOC and its payments. First, it can tell you what your monthly interest payments will be for any loan balance and interest rate. Second, it will tell you what your total interest payments will be over a 10-year interest-only draw period, both with and without additional payments toward loan principle.
It will also allow you to determine how quickly you can pay down your loan balance by making additional payments toward loan principle during the interest-only phase of your home equity line of credit. You can choose monthly, annual or a one-time payment option.
You can also calculate how much you need to pay to reduce your balance to a certain target amount by the end of the draw period, or what you need to do to pay off the balance within a certain length of time.
Another option is to determine how much you can borrow with a given minimum monthly payment, if you are working from a certain budget. See the instructions below.
Finally, the calculator will let you see how much in interest you can save overall during the draw period of the loan by making payments against loan principle. It will also show you a full report of the loan amortization over time, and show a comparison with and without additional payments.
Using the Home Equity Line of Credit Payments Calculator
Here’s how it works:
Start by deciding if you want to calculate the minimum monthly payments for a certain loan balance, or how much you can borrow while not exceeding a certain minimum payment. Select one or the other in the circles on the line marked “calculate.”
Depending on your choice, enter your outstanding loan balance or the minimum monthly payment you wish to work with. The calculator will determine the other amount and display it in a gray box.
Enter in the interest rate you expect to pay. Since HELOCs are adjustable-rate mortgages during their draw phase, you may wish to using the slider to view how variations in interest rates might affect your answers.
Note that the minimum monthly payment figure is your monthly interest costs for the loan balance in question. Next, you can calculate what the effect would be of making additional payments against loan principle.
Click Additional principal payments to expand the section, and choose whether you would like to make monthly, annual or a one-time additional payment against the loan principle.
Enter the additional amount you would like to pay. Again, you can use the slider to experiment with how varying this amount will affect your results.
Indicate how soon you would like to start making additional payment, in months.
The Principal Balances section will automatically update to display how quickly you can pay down your loan balance by making the additional payments you entered. The “ending balance” figure just above it will show what your balance will be at the end of the 10-year draw period.
Click “View report” to open a new page with tables showing your total interest payments and savings, your total loan payments and an amortization table comparing the loan both with and without additional payments over time.
Who is this Calculator for?
This calculator is most useful for calculating the costs and payments of a home equity line of credit during the interest-only draw period. HELOCs are divided into two phases, the interest-only draw phase during which you can borrow against your line of credit, and the repayment phase afterward, when you have to begin repaying the loan principle on a fully amortizating schedule.
Since your monthly payments can increase significantly when you have to begin repaying both principle and interest, it’s helpful to see what you can do to reduce your loan balance before you reach that point. That’s what this Home Equity Line of Credit Payments Calculator does.
Other calculators can provide different types of information. If you want to calculate payments over the entire length of the loan, use our Home Equity Loan and HELOC Calculator – just click on the highlighted link. Or if you want to see how much you can borrow based on your home equity, use our Home Equity Line of Credit Calculator instead.
How do I calculate payments for an adjustable rate?
As noted above, home equity lines of credit are adjustable-rate loans during the interest-only draw phase. Since you can’t predict what interest rates will do over time, you can’t calculate exactly what your payments or interest charges will be if rates go up or down.
You can, however, estimate what the effect of changing rates might be by using the slider next to the interest rate box to vary the rate and see how different rates affect your results. You can use that to determine the minimum you have to pay or the maximum you can borrow to pay down the balance as planned or stay within your budget.
What is “principal”?
A principal, in the financial context, refers to a repayment amount which is not related or inclusive of interest or profit. It is relevant to the Line of Credit Payments Calculator as typically you will need to decide upon a principal to repay your lender, alongside your standard required interest-only repayments.
How much equity do I need to get a HELOC?
Depending on the lender and your borrower profile, lenders will generally allow you to borrow against a maximum of 75-90 percent of your home value, for all loans combined. That means your primary mortgage used to purchase the home and your HELOC or any other second mortgages.
Let’s say you own a $250,000 home and owe $150,000 on the mortgage. So 60 percent of your home value is already taken up by the mortgage. But that still leaves you with $100,000 in home equity. If a lender will allow you to borrow against up to 80 percent of your home value, 80 percent of $250,000 is $200,000. So $200,000 maximum for all loans combined minus $150,000 for your current mortgage leaves $50,000 in available equity you can use for a Home Equity Line of Credit.
Again, that will vary depending on how much of your home value your lender will allow you to borrow against. That in turn will depend on the lender, your credit score and how much other debt you’re presently carrying. Plus your home’s current appraised value.
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