1. What is a Home Equity Line of Credit?

A Home Equity Line of Credit (HELOC) is a revolving line of credit that allows homeowners to borrow against the equity in their home. Unlike a traditional loan, you can draw funds as needed up to your credit limit during the draw period.

2. How Does the Calculator Work?

The calculator uses the standard loan payment formula:

Where:

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

Explanation: This formula calculates the fixed monthly payment required to fully repay the loan over its term, including both principal and interest.

3. Understanding Your Payment

Details: Your monthly payment is determined by the amount borrowed, interest rate, and repayment term. Early payments consist mostly of interest, while later payments apply more to principal.

4. Using the Calculator

Tips: Enter the loan amount in dollars, annual interest rate as a percentage (e.g., 5.25), 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: How does HELOC differ from a home equity loan?
A: A HELOC is a revolving line of credit with variable rates, while a home equity loan provides a lump sum with fixed rates and payments.

Q2: Are there other costs besides the monthly payment?
A: Yes, there may be closing costs, annual fees, or early termination fees depending on your lender.

Q3: What happens if I only make minimum payments?
A: During the draw period, you may only pay interest. After the draw period ends, payments increase to repay principal plus interest.

Q4: Can interest rates change?
A: Most HELOCs have variable rates tied to an index like the prime rate, so payments may change over time.

Q5: Is the interest tax deductible?
A: Interest may be deductible if funds are used to buy, build, or substantially improve your home (consult a tax advisor).