HELOC Calculator: How Much You Can Borrow and What It Costs
A home equity line of credit (HELOC) calculation starts with two separate questions: how much you can borrow, and what the payment actually costs once you draw on it. Lenders answer the first question with a combined loan-to-value (CLTV) formula.
The second question has two different answers depending on whether you are in the draw period or the repayment period, and that difference catches a lot of borrowers off guard. This guide walks through both with real numbers, using our mortgage and net worth calculators to model the rest of your picture.
How much you can borrow: the combined loan-to-value formula
Most lenders cap your combined loan-to-value (CLTV) — your first mortgage plus the new HELOC — at 80% to 85% of your home's appraised value, according to the Consumer Financial Protection Bureau. To find your available credit limit, multiply your home's value by the lender's CLTV cap, then subtract your current mortgage balance.
Say your home appraises at $500,000 and you owe $250,000 on your first mortgage. At an 80% CLTV cap, your maximum combined debt is $500,000 × 0.80 = $400,000. Subtract the $250,000 you already owe, and your available HELOC credit limit is $150,000. A lender may approve less based on your income, credit score, and debt-to-income ratio, but $150,000 is the equity-based ceiling.
Draw-period payments are interest-only — and lower than they look
During the draw period, typically 10 years, most HELOCs require interest-only payments on whatever balance you have drawn, at a variable rate tied to the prime rate. You are not required to pay down principal, so the payment can look deceptively small next to the credit line you were approved for.
Suppose you draw $50,000 of your $150,000 line at an 8.5% variable rate. Your monthly interest-only payment is $50,000 × 8.5% ÷ 12 = $354.17. That payment moves with the prime rate every time it changes, but it never includes principal as long as you're in the draw period.
The repayment-period payment jump most borrowers don't see coming
When the draw period ends, the HELOC converts to a fully amortizing loan over the repayment period, often 10 to 20 years. Your payment now includes both principal and interest, even if your rate hasn't changed at all — and that alone can push the payment up sharply.
Take that same $50,000 balance into a 20-year repayment period at the same 8.5% rate. The fully amortizing payment is $433.91 a month — a jump of $79.74, or about 22.5%, with no rate increase at all. If rates rose during your draw period too, the jump is larger. Budget for the repayment-period payment before you draw, not after the draw period ends.
HELOC vs. home equity loan vs. cash-out refinance
A HELOC is a revolving, variable-rate line you draw against as needed, similar to a credit card secured by your home. A home equity loan is the opposite: a fixed lump sum at a fixed rate, repaid on a set schedule from day one. A cash-out refinance replaces your entire first mortgage with a larger one and hands you the difference in cash, per the CFPB's comparison of home equity loans and HELOCs.
| | HELOC | Home equity loan | Cash-out refinance | |---|---|---|---| | Payout | Draw as needed | Lump sum | Lump sum | | Rate | Variable | Fixed | Fixed (usually) | | Payment | Interest-only, then amortizing | Fixed from day one | Fixed, replaces old mortgage | | Best for | Ongoing/uncertain costs (renovation phases) | One-time known cost | Large one-time cost + rate improvement |
See our full breakdowns of HELOC vs. personal loan and cash-out refinance vs. HELOC for the side-by-side numbers.
Common mistakes to avoid
Borrowing against the full approved line instead of what you actually need. Every drawn dollar accrues interest immediately and raises your future repayment-period payment.
Assuming the interest is automatically tax-deductible. Under IRS Publication 936, HELOC interest is deductible only when the funds are used to buy, build, or substantially improve the home securing the loan — not for tuition, credit card payoff, or everyday spending.
Ignoring the variable-rate risk. A HELOC's rate can rise well before the draw period ends, so your interest-only payment isn't fixed even before you reach the repayment-period jump.
Frequently asked questions
What is a HELOC?
A HELOC (home equity line of credit) is a revolving line of credit secured by your home, similar to a credit card. You draw against it as needed up to your approved limit, and you pay interest only on the amount you've actually drawn, according to the CFPB.
How much HELOC can I get?
Most lenders cap your combined loan-to-value at 80% to 85% of your home's value. Multiply your home's value by that percentage, then subtract your current mortgage balance to estimate your available credit limit. Your income, credit score, and debt-to-income ratio can lower that further.
Why did my HELOC payment go up if my rate didn't change?
When your draw period ends, your HELOC switches from interest-only payments to a fully amortizing payment that includes principal. On a $50,000 balance at 8.5% over 20 years, that switch alone raises the payment from $354.17 to $433.91 a month, even with no rate change.
Is HELOC interest tax deductible?
Only if the funds were used to buy, build, or substantially improve the home securing the loan, per IRS Publication 936. Interest on a HELOC used for tuition, debt consolidation, or everyday expenses is not deductible as home mortgage interest.
What's the difference between a HELOC and a home equity loan?
A HELOC is a variable-rate line of credit you draw from as needed. A home equity loan is a fixed lump sum at a fixed rate with a set repayment schedule from the start. The CFPB recommends comparing both against your actual cash-flow need before choosing.
Sources
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