1. What is a HELOC Interest-Only Payment?

A HELOC (Home Equity Line of Credit) interest-only payment is the minimum payment required during the draw period where you pay only the interest charges on the amount you've borrowed, without reducing the principal balance.

2. How Does the Calculator Work?

The calculator uses the interest-only payment formula:

Where:

• \( Drawn\ Amount \) — The amount you've borrowed from your HELOC
• \( r \) — Annual interest rate (in decimal form)
• \( \frac{r}{12} \) — Monthly interest rate

Explanation: The formula calculates the monthly interest charge by converting the annual rate to a monthly rate and applying it to the outstanding balance.

3. Importance of HELOC Payment Calculation

Details: Understanding your interest-only payment helps with budgeting during the draw period and planning for when the repayment period begins (when you must pay both principal and interest).

4. Using the Calculator

Tips: Enter the current drawn amount from your HELOC and the annual interest rate. The calculator will show your monthly interest-only payment.

5. Frequently Asked Questions (FAQ)

Q1: What happens after the interest-only period ends?
A: Typically, you enter the repayment period where payments include both principal and interest, often resulting in higher payments.

Q2: Can I pay more than the interest-only amount?
A: Yes, most HELOCs allow additional principal payments during the draw period, which reduces future interest charges.

Q3: How often do HELOC interest rates change?
A: Most HELOCs have variable rates that change with the prime rate. Check your loan terms for specifics.

Q4: Are interest payments tax deductible?
A: In many cases, yes (up to certain limits), but tax laws change. Consult a tax professional for your specific situation.

Q5: What's the difference between HELOC and home equity loan payments?
A: Home equity loans typically have fixed rates and require immediate principal+interest payments, while HELOCs often start with interest-only payments.