About Home Equity Loans and Lines of Credit
Home equity loans and HELOCs are loans that are secured by your financial stake in your home – your home equity. As such, they have tend to have lower interest rates than other, unsecured loans.
The key differences between a home equity loan and a HELOC are in how you receive the money and how you pay it back. With a home equity loan, you borrow the funds in one lump sum and immediately begin paying it back in installments.
With a HELOC, you're given a line of credit that allows you to borrow as you wish up to a certain limit. There's a period of time you're allowed to borrow money, called the draw, followed by another phase during which you repay the money you've borrowed.
As you can see, this calls for two different approaches to calculating loan payments. But this calculator can help you do both.
Using the Calculator for a Home Equity Loan
Doing the calculations for a home equity loan is fairly simple. Since these are usually fixed-rate loans repaid on a regular schedule, all you have to do is enter your loan amount, interest rate and length of the loan, and the calculator will provide your monthly payments.
On the calculator, click on the "Payment" button, then choose "fixed-rate loan" under "Payment option." Enter the loan amount, length of loan in months and interest rate, then hit "Calculate." The calculator will indicate what your monthly payments would be.
You can also run the process backward, indicating the monthly payment you can afford and letting the calculator determine how much you can borrow. To do that, click the "Loan amount" button, then enter your desired monthly payment, length of the loan and interest rate. The calculator will show you how much you can borrow with that payment.
Using the Calculator for a Home Equity Line of Credit
Figuring out the payments for a HELOC is more complicated. For one thing, HELOCs are interest-only loans during the draw period – you don't have to repay any principle during that phase, but you must pay off any interest charges as they occur. HELOCs are also adjustable-rate loans during the draw, so you can't pin them down to a single interest rate.
Because you're also borrowing – and possibly repaying, though that isn't required – various amounts of money during the draw, you may not have a set loan balance to calculate your payments against.
Once the draw ends, you don't borrow any more money and begin repaying principle, usually at a fixed rate. So from that point on it works like a regular home equity loan.
This calculator lets you do several different types of calculations to help you figure out what your payments will be.
To determine your payments during the draw phase:
Choose "100 percent of interest owed" as your payment option and then proceed as above. The calculator will give you your interest-only payments for the loan.
To see how borrowing more money or a varying interest rate would affect your payments, use the sliding green triangles to adjust those values.
To determine payments for paying down the balance at a certain rate:
For you payment option, choose either 1%, 1.5% or 2% of the balance and the calculator will show you your balance for paying down your loan principle at that rate. Note that these may not fully pay off the principle by the end of the draw periods.
To determine payments during the repayment phase:
Follow the same steps as for a standard home equity loan.
Looking for a home equity loan or line of credit? Use the "Get Free Quote" tab at the top of the page to get personalized rate quotes from lenders.
Home Equity Loan & HELOC Calculator Overview
Whether you have a mortgage loan or a line of credit it is important to know what your monthly payments will be. Determining what your monthly payments may be will directly affect your decision as to whether or not you can afford to set up a mortgage or a line of credit. Where traditional mortgages typically require a principal and interest fixed monthly mortgage payment, a line of credit typically requires that borrowers pay a minimum payment of just interest. Because the interest rate and monthly payments on a line of credit may change, the balance and required payments can change as well.