1. What is a HELOC?

A Home Equity Line of Credit (HELOC) is a revolving credit line that allows homeowners to borrow against their home's equity. It typically has a variable interest rate and a draw period followed by a repayment period.

2. How Does the Calculator Work?

The calculator uses the standard loan payment formula:

Where:

• \( PMT \) — Monthly payment
• \( P \) — Principal amount drawn
• \( r \) — Monthly interest rate (annual rate ÷ 12)
• \( n \) — Number of months in repayment period

Explanation: This formula calculates the fixed monthly payment required to fully repay the borrowed amount plus interest over the specified term.

3. Understanding HELOC Payments

Details: During the draw period (typically 5-10 years), you may only need to pay interest. This calculator shows payments during the repayment period when you must pay both principal and interest.

4. Using the Calculator

Tips: Enter the amount you plan to draw, the current annual interest rate, and the repayment term in months. For interest-only payments during draw period, set term to 1 month and multiply result by your drawn amount.

5. Frequently Asked Questions (FAQ)

Q1: How is HELOC different from a home equity loan?
A: A HELOC is a revolving credit line with variable rates, while a home equity loan is a lump sum with fixed rates and payments.

Q2: What are typical HELOC terms?
A: Common terms include 10-year draw period followed by 20-year repayment, but terms vary by lender.

Q3: Are HELOC payments tax deductible?
A: Interest may be deductible if used for home improvements (consult a tax professional).

Q4: What factors affect HELOC rates?
A: Rates are typically based on prime rate plus a margin, determined by credit score and loan-to-value ratio.

Q5: Can I convert my HELOC to fixed payments?
A: Some lenders offer fixed-rate conversion options for all or part of your balance.