Home Equity Line of Credit (HELOC) Calculator

Estimate your potential HELOC amount and associated payments.

Estimate Your HELOC Potential

Part 1: Estimate Available Credit
The maximum percentage of your home's value the lender will allow for total loans (mortgage + HELOC).
Part 2: Estimate Payments Based on Amount Drawn
This should be less than or equal to the Max Potential HELOC calculated above.
Enter expected rate (remember HELOC rates are often variable).

Understanding Home Equity Lines of Credit (HELOCs)

A HELOC is a form of revolving credit where your home serves as collateral. It functions somewhat like a credit card – you're given a maximum credit limit based on your home's equity, and you can borrow funds up to that limit during a set "draw period."

How Much Can You Borrow? (Available Credit)

Lenders typically determine your HELOC limit based on:

  • Home Value: The current market value of your home (usually determined by an appraisal).
  • Mortgage Balance: How much you still owe on your primary mortgage(s).
  • Loan-to-Value (LTV) Ratio: The maximum percentage of your home's value that the lender is willing to lend against, considering all loans secured by the property (mortgage + HELOC). This is often 80% or 85%.

The calculation is generally: `(Home Value * Max LTV Ratio) - Current Mortgage Balance = Max Potential HELOC Amount`.

Part 1 of the calculator estimates this potential borrowing limit.

How are Payments Calculated? (Payment Estimation)

HELOCs usually have two distinct phases influencing payments:

  • Draw Period (e.g., 10 years):** During this time, you can borrow funds. Payments are often interest-only on the amount you've actually borrowed (the outstanding balance). This means your payments can be lower initially but don't reduce the principal owed.
  • Repayment Period (e.g., 20 years):** After the draw period ends, you can no longer borrow. The outstanding balance is converted into a loan that must be repaid over the remaining term. Payments switch to **Principal and Interest (P&I)**, calculated to fully pay off the balance by the end of the term. These P&I payments are typically much higher than the earlier interest-only payments.

Part 2 of the calculator estimates these two types of payments based on a hypothetical amount you might draw.

Variable Rates & Payment Shock:** Remember, most HELOCs have **variable interest rates**. The rate you get initially can change, affecting your payments. Also, be prepared for the significant increase in payment amount when the loan transitions from the interest-only draw period to the P&I repayment period ("payment shock").

How to Use This Calculator

  1. **Part 1 (Available Credit):** Enter your Estimated Home Value, Current Mortgage Balance, and the lender's likely Maximum LTV Ratio (85% is a common default).
  2. **Part 2 (Payment Estimation):** Enter the Estimated Amount you plan to Draw on the HELOC, your estimated Annual Interest Rate, the Draw Period length, and the Repayment Period length.
  3. Click "Calculate HELOC Details".
  4. Review the "Available Credit Estimation" section to see your potential borrowing limit.
  5. Review the "Payment Estimation" section to see estimated interest-only and P&I payments based on the amount you entered as "Amount Drawn".

Important Disclaimer:** All results are **estimates** for informational purposes only. Your actual available credit line and payments will depend on lender underwriting, appraisal results, variable interest rate fluctuations, and the actual amount you borrow over time. This calculator does not account for fees or guarantee loan approval.

Interested in Using Your Home's Equity?

Blue Sky Loans can help you understand your options. Contact us or apply online to learn more.

Apply for HELOC