Determining Monthly HELOC Payments
This calculator can be used to estimate a borrower’s monthly home equity line of credit, or HELOC, payments. The calculator needs a total of five inputs, including:
- The current home equity line of credit balance, if any
- The annual rate of interest charged on the HELOC loan
- The loan withdrawal each month, this calculator assumes the user would like a steady source of income from their HELOC
- The number of months the user would like to draw from their HELOC
- The repayment period, stated in months, over which the borrower would like to repay the HELOC. If this is a balloon loan, enter one (1)
The calculator then provides the user with four outputs, including:
- The interest-only monthly payments if the HELOC is offered as an interest-only loan
- The net funds available to the borrower, which subtracts the interest-only payment from the loan withdrawal value
- The balance of the loan at the end of the draw period
- Finally, the calculator supplies the monthly payment during the repayment period
Home Equity Lines of Credit
A home equity lines of credit, or HELOC, can take several different forms. For example, it can take the form of a lump sum or a monthly draw. This calculator accommodates both options. The interest rate charged on the loan may also be adjustable and could consist of a base rate plus a profit margin for the lender. Typically, the terms and conditions of a HELOC would spell out both the draw as well as the repayment period. A HELOC can also result in a balloon payment, meaning the money borrowed must be repaid at the end of the draw period. When this occurs, the borrower may have to refinance their loan as part of their HELOC agreement.
HELOC Repayment Calculations
This calculator is designed to accommodate several different HELOC scenarios:
- Interest-Only Loan: In this scenario, the HELOC is received as a lump sum payment that requires an interest-only payment each month. To model this arrangement, enter the lump sum as the Current HELOC Balance, supply the Annual Interest Rate charged, and set the other calculator values to zero. The Monthly Payment is the interest-only payment.
- Balloon Loan: In this scenario, the HELOC’s terms and conditions include both a draw period as well a balloon payment at the end of the Draw Period. To model this scenario, set the Current HELOC Balance to zero, supply the Annual Interest Rate charged and the Draw Period. Finally, set the Repayment Period to one (1).
- Draw & Repayment Loan: In this last scenario, the HELOC involves both a monthly draw and repayment period. To model this scenario, supply the Annual Interest Rate on the loan, the Loan Withdrawal per Month, Draw Period, and Repayment Period. The calculator with then provide the HELOC’s Ending Balance and the Monthly Payment during the Repayment Period.
A quick note about the Net Monthly Funds variable. This value is found by subtracting the Monthly Payment from the Loan Withdrawal. If there is no Current HELOC Balance, the Net Monthly Funds will be equal to the Loan Withdrawal. If there is an existing HELOC balance, which requires an interest-only payment, the Net Monthly Funds is equal to the Loan Withdrawal minus the Monthly Payment on the interest-only portion of the HELOC.