How we calculate
Every number in the HELOC calculator comes from the formulas below. The worked example uses a $450,000 home, a $250,000 mortgage balance, $75,000 needed, a 8% rate, a 10-year draw period and a 20-year repayment period.
1. Borrowing limit
Limit = home value × CLTV cap − mortgage balance, and never below zero. CLTV (combined loan-to-value) is the share of the home's value that all loans secured by it may reach together.
- We use 85% by default, the most Bank of America and PenFed generally allow. Other lenders set their own caps.
- We use 80% in Texas, where the state constitution limits home equity borrowing on a homestead to 80% of market value.
- We use 80% for condos, as some lenders do (PenFed caps condos at 80%).
Example: $450,000 × 85% = $382,500; minus $250,000 = $132,500. If you ask for more than the limit, payments are calculated on the limit.
2. Payment during the draw period
Interest-only payment = balance × annual rate ÷ 12. We assume you draw the full amount at the start and pay only interest, which some HELOC plans allow during the draw period. Example: $75,000 × 8% ÷ 12 = $500 a month.
3. Payment after the draw period
The balance is repaid in equal monthly payments over the repayment period, using the standard loan formula: payment = P × r ÷ (1 − (1 + r)−n), where P is the balance, r the monthly rate (annual rate ÷ 12) and n the number of months. Example: $75,000 over 240 months at 8% = $627 a month.
4. Rate-rise check
HELOC rates usually move with an index, so we repeat step 3 at a rate 2 percentage points higher. Example at 10%: $724 a month. The 2 points are an illustration, not a forecast.
5. Total interest
Total interest = interest-only payment × draw months + repayment payment × repayment months − balance. Example: $135,559. It assumes the rate never changes and the full amount is drawn on day one, so real totals are lower if you draw less or pay principal early, and higher if rates rise.
6. Starting rate
The calculator starts at 8%: the prime rate (7% on October 2, 2026, Federal Reserve data via FRED) plus an example margin of 1 point. It is not a quote. Lenders add their own margin to an index, and your rate depends on your credit, the amount of equity and the lender. Replace it with the rate a lender offers you.
What the calculator does not include
- Closing costs, appraisal, annual or early-closure fees.
- Minimum draw amounts, rate caps, promotional or fixed-rate options.
- Your credit approval, income or debt-to-income ratio. Lenders check these separately.
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