HELOC payment calculator

HELOC payments — the two-phase payment trap

A HELOC is unusual among loan products because it has two distinct payment structures back-to-back. During the "draw period" (typically 10 years) you can borrow and repay flexibly, paying only the interest on your current balance. When the draw period ends, you enter the "repay period" (typically 20 years) during which the loan fully amortizes like a regular mortgage. The jump between these two phases catches a lot of homeowners off-guard.

How HELOC rates work

Most HELOCs are variable-rate, pegged to the Prime rate published by the Wall Street Journal (which itself tracks the Fed Funds rate + 3%). Your HELOC rate is Prime + a margin determined at origination based on your credit score, loan-to-value, and bank relationship.

• Prime at 8.50% (late 2024)
• Margin for strong borrowers: 0–1%
• Margin for average borrowers: 1–3%
• Margin for marginal borrowers: 3–5%

So a typical HELOC rate in 2024 is 9–12%. When the Fed raises rates, your HELOC payment goes up the same month. When the Fed cuts, your payment drops. This makes HELOCs particularly sensitive to rate-cycle timing.

The draw period — interest-only math

During the draw period, the minimum payment is just the month's interest. No principal reduction. Formula:

min payment = balance × (APR / 12)

For a $60,000 balance at 9.25% APR, that's $463/month. But paying only the minimum means your balance never shrinks — you're just renting the money. Many HELOC borrowers pay extra during the draw period to reduce the balance before the repay period starts.

The repay period — fully amortizing

When the draw period ends, the lender calculates a fully amortizing payment that will zero-out your balance over the repay term. The formula is the standard mortgage amortization:

payment = balance × r / (1 − (1+r)-n), where r is the monthly rate and n is the number of months in the repay period.

For a $60,000 balance at 9.25% amortizing over 20 years (240 months), the payment is $550/month — about 18% higher than the interest-only. But if the balance is $150,000 (a bigger HELOC used for a major renovation), the payment jumps from $1,156 interest-only to $1,374 amortizing — a $218/month hit that can blow up a household budget.

Why HELOC rates are high right now

Pre-2022, HELOC rates hovered at 4–5% because Prime was at 3.25–3.5%. After the Fed's hiking cycle, Prime shot up to 8.50% and HELOC rates followed. HELOCs that were locked in at 4% with a 10-year draw period suddenly adjusted to 9%+ when the Fed moved, doubling interest-only payments for existing borrowers.

Alternatives to compare

• Cash-out refinance — replaces your existing mortgage with a larger one at a fixed rate. Only makes sense if you're okay giving up a low legacy mortgage rate (many people have 3% mortgages that would reset to 7%).
• Home equity loan — fixed-rate lump sum. No payment shock, but less flexible than a HELOC. Rates are typically 0.5–1% higher than HELOC.
• Personal loan — unsecured, no lien on house. Rates 7–20% depending on credit. Smaller amounts ($5,000–$50,000). Good for middle-range borrows where you don't want to tie up home equity.
• Credit card 0% balance transfer — for short-horizon (<18 months) debt consolidation, can be cheaper than HELOC total-cost.

When a HELOC makes sense

Uneven cash-flow renovations where you don't know the exact total. Emergency reserves for a medium-risk household (don't tap the HELOC unless needed; it's just there). Bridge financing for a home purchase before selling the existing home. Any of these beat a cash-out refi if you have a low legacy mortgage rate.

When a HELOC is a trap

Funding a consumer lifestyle — vacation, car, boat. The tax deduction that used to justify "cheap" HELOC debt is mostly gone post-TCJA. At 9%+ variable, a HELOC is expensive debt with foreclosure risk attached. If you can't pay, the bank takes the house. A credit card default hurts your credit; a HELOC default costs you your home.