HELOC Payment Calculator: How Much Will My Home Equity Line Cost?

A Home Equity Line of Credit (HELOC) can be a powerful financial tool—or a dangerous trap if you don't understand how the payments work. Unlike a traditional loan, HELOCs have two distinct phases with dramatically different payment structures.

This comprehensive guide covers how HELOC payments work, calculating interest-only payments during the draw period, what happens when repayment begins, strategies to minimize interest, and real examples to help you understand the true cost of borrowing against your home.

Table of Contents

1. How HELOCs Work
2. HELOC Draw Period Payments
3. HELOC Repayment Period
4. Calculating Total HELOC Costs
5. HELOC vs. Home Equity Loan
6. Strategies to Pay Off HELOC Faster
7. Common HELOC Payment Mistakes
8. Real HELOC Payment Examples

How HELOCs Work

What Is a HELOC?

Home Equity Line of Credit: Revolving credit line secured by your home equity.

How it works: Like a credit card secured by your house. You have a credit limit, can borrow and repay repeatedly during the draw period, and only pay interest on the balance you use.

Credit limit based on:

HELOC Limit = (Home Value × LTV Percentage) - Mortgage Balance

Example:

• Home value: $500,000
• Lender allows: 85% LTV
• First mortgage: $300,000

Max HELOC: ($500,000 × 0.85) - $300,000 = $125,000

Two-Phase Structure

Phase 1: Draw Period (typically 10 years)

• Borrow up to credit limit
• Repay and borrow again (revolving)
• Usually interest-only minimum payments
• Can pay down principal if you choose

Phase 2: Repayment Period (typically 10-20 years)

• Can no longer borrow
• Must pay principal + interest
• Payments much higher
• Amortized like traditional loan

Total timeline: Usually 20-30 years

Variable vs. Fixed Rate

Most HELOCs: Variable rate

• Tied to Prime Rate + margin
• Prime Rate (Feb 2026): ~7.5%
• Typical margin: 0.5-2.0%
• Your rate: 8.0-9.5%

Rate changes:

• Monthly or quarterly
• Payments adjust accordingly
• Can increase significantly

Fixed-rate options:

• Some lenders offer
• Lock in rate on portion of balance
• Typically higher than initial variable rate
• Provides payment stability

HELOC vs. Credit Card

Similarities:

• Revolving credit
• Borrow up to limit
• Only pay interest on balance used
• Minimum monthly payments

Differences:

| Feature | HELOC | Credit Card | |---------|-------|-------------| | Security | Home equity | Unsecured | | Interest Rate | 7-10% | 18-28% | | Credit Limit | $10,000-$250,000 | $500-$50,000 | | Risk | Lose home if default | Credit score damage | | Tax Deduction | Maybe (home improvement) | No | | Fees | $0-$1,000 closing | Usually none |

HELOC Draw Period Payments

Interest-Only Payment Formula

During draw period, most HELOCs require only interest—no principal repayment required.

Formula:

Monthly Payment = (Balance × Annual Rate) ÷ 12

Example:

• Balance: $50,000
• Rate: 8.5%
• Monthly: ($50,000 × 0.085) ÷ 12 = $354.17

Extremely low compared to principal + interest payment!

Interest-Only Payment Examples

| Balance | Rate 7% | Rate 8% | Rate 9% | Rate 10% | |---------|---------|---------|---------|----------| | $10,000 | $58 | $67 | $75 | $83 | | $25,000 | $146 | $167 | $188 | $208 | | $50,000 | $292 | $333 | $375 | $417 | | $75,000 | $438 | $500 | $563 | $625 | | $100,000 | $583 | $667 | $750 | $833 | | $150,000 | $875 | $1,000 | $1,125 | $1,250 |

Note: These are MINIMUM payments. Balance doesn't decrease unless you pay more.

Payment Changes with Variable Rate

Scenario: $60,000 balance

Year 1 (Rate: 8.0%): Monthly payment: $400

Year 2 (Rate increases to 9.0%): Monthly payment: $450 (+12.5%)

Year 3 (Rate increases to 10.0%): Monthly payment: $500 (+25% from start)

Year 4 (Rate decreases to 8.5%): Monthly payment: $425

Variable rates mean unpredictable payments. Budget for higher rates.

The Interest-Only Trap

The problem: Paying only interest means balance NEVER decreases.

Example:

• Borrow: $70,000
• Pay interest-only for 10 years
• Total paid: ~$60,000 (in interest)
• Balance remaining: Still $70,000!

You've paid $60K and still owe the full amount!

Then repayment period starts and payments jump dramatically.

Can You Pay Principal During Draw Period?

Yes! And you should.

Benefits:

• Reduce balance
• Lower repayment period payment
• Save thousands in interest
• Maintain flexibility (can re-borrow if needed during draw period)

Example:

• Required: $400/month (interest only)
• You pay: $1,000/month
• Extra $600 goes to principal

Result: $60,000 balance → Pay down $7,200/year → After 5 years, balance is only $24,000

When repayment hits: Much more manageable!

HELOC Repayment Period

What Happens When Draw Period Ends

Transition at year 10 (typical):

Before (Draw Period):

• Interest-only payment
• Can borrow more
• Balance: Whatever you've borrowed

After (Repayment Period):

• Principal + interest payment
• Cannot borrow more
• Must pay off balance over remaining term (typically 10-20 years)

Payment usually doubles or triples!

Repayment Period Payment Formula

Uses standard amortization formula:

Monthly Payment = P × [r(1 + r)^n] / [(1 + r)^n - 1]

Where:

• P = Principal balance remaining
• r = Monthly interest rate (annual rate ÷ 12)
• n = Number of months in repayment period

Or use simpler approach: Online amortization calculator with current balance as loan amount.

Repayment Period Payment Examples

Scenario: $50,000 balance when draw period ends

15-year repayment:

| Rate | Monthly Payment | Total Interest Paid | |------|-----------------|---------------------| | 7% | $449 | $30,880 | | 8% | $478 | $36,029 | | 9% | $507 | $41,334 | | 10% | $537 | $46,796 |

20-year repayment:

| Rate | Monthly Payment | Total Interest Paid | |------|-----------------|---------------------| | 7% | $388 | $43,027 | | 8% | $418 | $50,312 | | 9% | $450 | $57,909 | | 10% | $483 | $65,822 |

Shorter repayment = Higher payment, but much less interest

Payment Shock Example

Borrower: Takes $75,000 HELOC, makes interest-only payments

Draw Period (Years 1-10):

• Balance: $75,000 (unchanged)
• Rate: 8%
• Payment: $500/month
• Total paid over 10 years: $60,000
• Balance remaining: Still $75,000

Repayment Period Begins (Year 11):

• Balance: $75,000
• Rate: 8%
• Repayment term: 15 years
• New payment: $717/month

Payment increase: $500 → $717 = +43%

Many borrowers can't afford this!

Rate Increases During Repayment

If variable rate, payments can increase even more.

Example:

• Start repayment: $75K balance, 8% rate, $717/month
• Rate increases to 10%
• New payment: $806/month (+12%)

Budget for rate volatility during repayment period.

Refinance Option

If repayment payment is unaffordable:

Consider refinancing HELOC balance into:

• Home equity loan (fixed rate, fixed payment)
• Cash-out refinance of first mortgage
• Personal loan (if home equity loan rates are high)

Trade-off:

• May extend repayment period (lower payment)
• May pay more interest over life
• Exchanges variable rate for fixed rate

Calculating Total HELOC Costs

Total Cost Over Full Term

Example: $60,000 HELOC

• Draw period: 10 years, interest-only
• Repayment period: 15 years
• Average rate: 8%

Draw period cost: $60,000 × 0.08 × 10 years = $48,000 in interest

Repayment period cost: Using amortization: $41,000 in interest

Total interest paid: $48,000 + $41,000 = $89,000

Total cost: $60,000 borrowed + $89,000 interest = $149,000

You pay 2.5x what you borrowed!

Impact of Paying Principal Early

Same $60,000 HELOC, but pay $800/month instead of $400 interest-only

During draw period:

• Extra $400/month to principal = $4,800/year
• After 10 years: Balance = $60,000 - $48,000 = $12,000

Repayment period:

• Only $12,000 to pay off
• 15-year amortization at 8%: $115/month
• Interest over 15 years: $8,625

Total interest: $48,000 (draw) + $8,625 (repay) = $56,625

Savings vs. interest-only: $89,000 - $56,625 = $32,375 saved!

Fees and Other Costs

Initial costs:

• Application fee: $0-$500
• Appraisal: $300-$600
• Closing costs: $0-$1,000
• Annual fee: $0-$100

Ongoing costs:

• Annual maintenance fee: $50-$100 (some lenders)
• Transaction fees: $0-$25 per draw (rare)
• Inactivity fees: $25-$100/year if unused

Prepayment penalties:

• Some lenders charge if you close HELOC within 1-3 years
• "Early termination fee": $250-$500
• Read fine print carefully

Total fees over lifetime: $500-$2,500 typically

HELOC vs. Home Equity Loan

Payment Structure Comparison

HELOC:

• Draw period: Interest-only ($400/month on $60K)
• Repayment period: Principal + interest ($574/month)
• Variable rate
• Payment changes

Home Equity Loan:

• From day one: Principal + interest ($590/month on $60K, 8%, 15 years)
• Fixed rate
• Fixed payment
• Predictable

Monthly payment trajectory:

| Year | HELOC | Home Equity Loan | |------|-------|------------------| | 1 | $400 | $590 | | 5 | $400 | $590 | | 10 | $400 | $590 | | 11 | $717 | $590 | | 15 | $717 | $590 | | 20 | $717 | $590 | | 25 | $717 | $0 (paid off year 15) |

HELOC: Lower initially, but much higher later and lasts longer

Home Equity Loan: Higher initially, but stable and pays off sooner

Total Interest Comparison

Scenario: Borrow $60,000 at 8% average

HELOC (10-year draw + 15-year repay):

• Interest during draw: $48,000
• Interest during repay: $41,000 Total interest: $89,000 Total paid: $149,000

Home Equity Loan (15-year fixed):

• Interest: $46,230 Total paid: $106,230

Home Equity Loan saves: $42,770!

Unless you aggressively pay down HELOC during draw period.

When to Choose HELOC vs. Loan

Choose HELOC if:

• Uncertain how much you need
• Need over time, not all at once
• Want flexibility to borrow, repay, re-borrow
• Disciplined to pay principal during draw period
• Expect income to increase (can handle future higher payment)

Example: Home renovation where costs are phased over 2-3 years.

Choose Home Equity Loan if:

• Know exact amount needed
• Need lump sum immediately
• Want predictable fixed payment
• Prefer fixed interest rate
• Want to pay off faster

Example: Debt consolidation of $50K credit cards—take loan, pay off immediately, fixed payment to eliminate debt.

Strategies to Pay Off HELOC Faster

Strategy 1: Pay Principal from Day One

Don't fall into interest-only trap.

Method: Set up automatic payment for more than minimum.

Example:

• Balance: $40,000
• Minimum: $267/month (8% interest-only)
• You pay: $800/month
• Extra to principal: $533/month

Result: Pay off in 5.5 years instead of 25 years. Save $50,000+ in interest.

Strategy 2: Make Extra Lump-Sum Payments

Use windfalls to accelerate:

• Tax refunds
• Work bonuses
• Inheritance
• Sale of assets

Example:

• Balance: $55,000
• Regular payment: $500/month
• Tax refund: $4,000 → Apply to principal
• New balance: $51,000
• Saves ~$14,000 in interest over life

Strategy 3: Convert to Fixed-Rate Portion

If lender offers: Lock in fixed rate on portion of balance during draw period.

Benefit: Forces principal repayment on that portion immediately.

Example:

• Total balance: $70,000
• Convert $50,000 to fixed rate, 15-year amortization
• Payment on fixed portion: $478/month (includes principal)
• Keep $20,000 as revolving line

Result: Paying down balance while maintaining some flexibility.

Strategy 4: Refinance to Home Equity Loan

During draw period, if:

• You've used most of credit line
• Don't need flexibility anymore
• Want predictable fixed payment

Action: Refinance HELOC balance into home equity loan.

Example:

• HELOC balance: $65,000
• Refinance to 10-year home equity loan at 7.5%
• Fixed payment: $773/month
• Pays off in 10 years vs. 25+ years

Strategy 5: Bi-Weekly Payment Strategy

Method: Pay half monthly payment every two weeks.

Result: Make 26 half-payments per year = 13 full payments (one extra per year)

Example:

• Monthly payment: $600
• Bi-weekly: $300 every 2 weeks
• Annual: $7,800 instead of $7,200
• Extra $600/year accelerates payoff

On $50,000 HELOC: Payoff 2+ years earlier, save $8,000 in interest.

Strategy 6: Stop Using HELOC as ATM

The trap: Drawing, repaying, drawing again—balance never decreases.

Discipline needed:

• Once you draw for specific purpose, stop
• Pay down aggressively
• Don't treat as emergency fund
• Reserve for true emergencies only

Example of unsuccessful cycle:

• Year 1: Draw $30,000 for renovation
• Year 2: Pay down to $20,000
• Year 3: Draw another $25,000 for car purchase
• Year 4: Balance $45,000
• Year 5: Draw $15,000 for vacation
• Year 6: Balance $60,000
• Year 10: Draw period ends, owe $60,000, payment shock

Better: Draw once, pay off, resist urge to use again.

Common HELOC Payment Mistakes

Mistake 1: Paying Only Interest for Entire Draw Period

The error: Making minimum interest-only payments for 10 years.

Result:

• Balance unchanged
• Paid tens of thousands in interest
• Massive payment shock when repayment starts

Example: $80,000 HELOC, 8% rate

• 10 years interest-only: Pay $64,000, still owe $80,000
• Repayment starts: Payment jumps to $955/month

Solution: Pay at least $100-$200 extra per month toward principal from day one.

Mistake 2: Not Budgeting for Rate Increases

The error: Assuming variable rate will stay same.

Reality: Rates can increase 2-5% over life of HELOC.

Example:

• Start: 7.5% rate, $380/month on $60K
• Rates rise: 10.5% rate, $525/month (+38%)

Many borrowers can't absorb this increase.

Solution:

• Budget assuming rate 2% higher than current
• Lock in fixed rate if available
• Pay down principal aggressively

Mistake 3: Using HELOC for Depreciating Assets

The mistake: Using home equity to buy:

• Cars
• Vacations
• Electronics
• Furniture

Problem: Paying for 25 years for items used for 5-10 years.

Example: $30,000 HELOC for car

• Car worth: $10,000 after 10 years
• Still owe: $30,000 (if interest-only)
• Plus 15 more years of payments

Solution: Use HELOC only for:

• Home improvements (add value)
• Debt consolidation at higher rates
• Necessary expenses that increase net worth

Mistake 4: Not Understanding Draw Period End Date

The surprise: "My payment jumped from $400 to $800—what happened?!"

What happened: Draw period ended, repayment period began.

Solution:

• Know exact date draw period ends
• Set calendar reminders 2 years before
• Start paying principal aggressively 3-5 years before end
• Refinance if needed before transition

Mistake 5: Ignoring Rate Caps

Most HELOCs have rate caps:

• Lifetime cap: Maximum rate can reach (often Prime + 18%)
• Periodic cap: Max increase per adjustment (often 2% per year)

Example caps:

• Initial rate: 8%
• Lifetime cap: 18%
• Your payment could more than double

On $70,000 balance:

• At 8%: $467/month
• At 18%: $1,050/month

Solution: Read terms, understand caps, budget for worst case.

Mistake 6: Letting Balance Grow During Draw Period

The trap: Borrowing repeatedly up to limit.

Example:

• Year 1: Borrow $20,000
• Year 3: Borrow $15,000 more (balance: $35,000)
• Year 5: Borrow $20,000 more (balance: $55,000)
• Year 8: Borrow $25,000 more (balance: $80,000)

Result: Maxed out line, huge repayment burden.

Solution: Have specific purpose for each draw, pay off before drawing again.

Real HELOC Payment Examples

Example 1: Conservative User

Profile:

• Home value: $450,000
• Mortgage: $200,000
• HELOC limit: $100,000
• Purpose: Kitchen renovation

Usage:

• Draw: $35,000 (one time)
• Payment strategy: $800/month from start

Draw period (Years 1-10):

• Rate: 8.5%
• Interest-only minimum: $248
• Actual payment: $800
• Extra to principal: $552/month

After 10 years: Balance paid off completely! Total interest paid: $14,820

Repayment period: No balance, no payment!

Success: Treated HELOC like traditional loan, paid it off during draw period.

Example 2: Interest-Only User

Profile:

• HELOC: $60,000
• Draw: $60,000 (one time)
• Payment strategy: Interest-only minimum

Draw period (Years 1-10):

• Rate: 8% average
• Payment: $400/month
• Total paid: $48,000
• Balance remaining: $60,000

Repayment period (Years 11-25):

• Rate: 8%
• Term: 15 years
• Payment: $574/month
• Total paid: $103,320

Total cost: $48,000 + $103,320 = $151,320 total paid Interest: $91,320 Paid 2.5x what was borrowed

Example 3: Revolving User (Problematic)

Profile:

• HELOC limit: $75,000
• Treating as emergency fund

Timeline:

• Year 1: Draw $20,000 (home repair)
• Year 2: Pay down to $15,000
• Year 3: Draw $30,000 (medical bills), balance: $45,000
• Year 4: Pay down to $40,000
• Year 5: Draw $25,000 (home addition), balance: $65,000
• Year 6-10: Interest-only, balance: $65,000

Draw period end: Still owe $65,000 after paying interest-only for 10 years.

Repayment period:

• Payment jumps to $730/month (15 years, 9%)
• Struggles to afford
• Refinances to 20-year home equity loan
• New payment: $585/month

Total cost over 30 years: Approximately $200,000 paid on $65,000 borrowed.

Lesson: Revolving use without principal paydown = disaster.

Example 4: Strategic Debt Consolidation

Profile:

• Credit card debt: $45,000 at 22% APR
• Current CC payment: $1,350/month (mostly interest)
• HELOC available: $100,000 at 8%

Action:

• Draw $45,000 from HELOC
• Pay off credit cards completely
• Close credit card accounts

New payment strategy:

• Pay $1,350/month on HELOC (same as CC payment)
• Minimum would be $300 (interest-only)
• Extra $1,050 goes to principal

Result:

• Paid off in 3.5 years
• Total interest: $7,200
• Savings vs. credit cards: $65,000+

Success: Used HELOC strategically to eliminate high-interest debt, maintained aggressive payment, paid off quickly.

Key Takeaways

✓ Two-phase structure: Draw period (interest-only, 10 years) then repayment period (principal + interest, 10-20 years)

✓ Interest-only trap: Paying minimum during draw period means balance never decreases—massive payment shock when repayment starts

✓ Pay principal from day one: Even $200-300/month extra during draw period saves tens of thousands in interest

✓ Variable rate risk: Budget for rates 2-3% higher than current to handle increases

✓ Payment shock is real: Payments often double or triple when repayment period begins

✓ HELOC vs. Home Equity Loan: HELOC offers flexibility but costs more; home equity loan provides stability and faster payoff

✓ Don't use for depreciating assets: Reserve HELOC for home improvements or high-interest debt payoff, not cars or vacations

✓ Know your draw period end date: Start preparing 2-3 years before transition to repayment

Conclusion

HELOC payments are deceptively low during the draw period—but that's exactly the trap. The seemingly affordable interest-only payment masks the reality that you're not making progress on the balance, and when repayment begins, the payment shock can be financially devastating.

The most successful HELOC users treat it like a traditional loan from day one: borrow what they need for a specific purpose, then pay it off systematically over 5-10 years during the draw period. By the time repayment begins, the balance is zero or minimal, avoiding the payment jump entirely.

If you're considering a HELOC or already have one, run the numbers for both phases. Know exactly what your payment will be when repayment starts, and have a plan to pay down principal aggressively during the draw period. Your future self will thank you.

Use our HELOC payment calculator to model different scenarios—draw amounts, interest rates, payment strategies—and see the long-term cost of different approaches.

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Related Articles:

• HELOC Payment Calculator
• HELOC vs. Home Equity Loan: Which is Better?
• How Much Can I Borrow with a HELOC?
• Home Affordability Calculator