1. What is a Home Equity Line of Credit?

A Home Equity Line of Credit (HELOC) is a revolving line of credit that uses your home's equity as collateral. It allows you to borrow funds as needed, up to a predetermined limit, and typically has a variable interest rate.

2. How Does the Calculator Work?

The calculator uses the standard loan payment formula:

Where:

• \( PMT \) — Monthly payment amount
• \( P \) — Principal loan amount
• \( r \) — Monthly interest rate (annual rate ÷ 12)
• \( n \) — Number of payments (loan term in years × 12)

Explanation: This formula accounts for both principal and interest payments over the life of the loan.

3. Understanding Loan Payments

Details: Each payment consists of both principal and interest. Early in the loan, more of each payment goes toward interest. As the loan matures, more goes toward principal.

4. Using the Calculator

Tips: Enter the loan amount, annual interest rate, and loan term in years. The calculator will show your estimated monthly payment, total repayment amount, and total interest paid.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between HELOC and home equity loan?
A: A HELOC is a revolving line of credit with variable rates, while a home equity loan is a lump sum with fixed rates and payments.

Q2: Are HELOC payments tax deductible?
A: Interest may be deductible if funds are used to buy, build, or substantially improve your home (consult a tax advisor).

Q3: How does variable rate affect payments?
A: Your payments may change if interest rates change. This calculator assumes a fixed rate for the entire term.

Q4: What fees are not included?
A: This calculator doesn't account for origination fees, closing costs, or annual fees that may apply.

Q5: Can I pay off my HELOC early?
A: Most HELOCs allow early payoff without penalty, but check your specific terms.