HELOC Repayment Calculator
HELOC Payment Calculator
HELOC Repayment Calculator
A home equity line of credit (HELOC) is a line of credit secured by a portion of your home equity. You can spend against it, repay the credit, and spend again repeatedly over a period of time — often 10 years. A HELOC repayment calculator helps you estimate what your monthly payments on your HELOC might be if at the end of that period you owe the full amount you are entitled to borrow.
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What Is a HELOC Repayment Calculator?
The HELOC repayment calculator shows the monthly payment amount and total cost of borrowing based on information supplied by the borrower. You’ll be asked to supply the HELOC amount, plus your interest rate and term.
What Is a HELOC?
A HELOC, short for home equity line of credit, is a financial product offered by lenders who provide different types of mortgage loans. It uses your home equity to secure a line of credit against the value of your home. The lender will look at your home’s value, your existing mortgage loan, and your personal qualifications (like income and debt) to determine what the limit of the HELOC would be.
After you close on the HELOC, you can use it when you need it. Lenders typically provide a credit card, checks, or both to help you use the line of credit. When you repay it, you gain access to the credit limit again. It’s great for projects or uses where flexibility is key.
How to Use the HELOC Repayment Calculator
Using the HELOC repayment calculator is similar to using a home affordability calculator. It takes a few inputs from you and shows the resulting payment and interest costs. Here’s what you need to best use it.
Input how much you owe on your HELOC. You can find this number on your statement or online account.
Select a HELOC repayment period. It defaults to 10 years, but you can change it to another time period. If you want to pay off what you owe sooner, this is the field you’ll want to change to see how shortening the payment term raises your monthly payment and how much interest you’ll save.
Estimate APR. Change the annual percentage rate (APR) default to what you’re seeing lenders offer based on the current interest rates available. You’ll see how different APRs change what you’ll pay.
Note the payment frequency. This calculator assumes you will make payments monthly.
You’ll be able to see how changing some of these inputs can make a big difference in paying off your HELOC.
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Why Calculate Payments with a HELOC Repayment Calculator
Just as with a mortgage calculator, calculating payments with a HELOC repayment calculator can help you understand what the costs and payments are. With more knowledge, you can make better decisions with your finances. It can also help in the following ways:
See if the monthly payment is affordable. When you’re looking at having a line of credit, you’ll want to know what the monthly payment would be. Your lender will determine if it is willing to lend out the amount you’re looking for based in part on whether you’re able to make that monthly payment.
Understand the total costs. You should be keenly aware of how much you’ll pay, especially when it comes to the interest costs over time. Even with the low interest rate that a HELOC can offer, you’ll pay a significant amount of interest.
Reduce the amount of interest you owe. Using a HELOC repayment calculator helps you see the full picture of what you’re paying to borrow money. These amounts might scare you, but it could also help light a fire that helps you pay it off faster and pay less in interest.
Pay off your HELOC faster. You can change the term to see how paying off debt faster will affect your monthly payments and the amount of interest you pay.
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Benefits of Using a HELOC Repayment Calculator
The benefits of using a HELOC repayment calculator are straightforward: You’re able to see the full picture and understand the costs involved.
Of course, these are just estimates and you’ll want to talk to a lender when you get serious about a HELOC, but the lender can give you a good idea of what you may get.
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Benefits of a HELOC
When you’re getting a HELOC, there are a number of benefits this type of financing offers.
• Borrowing large amounts. Because your home is collateral on the line of credit, you may be able to access quite a lot of money. This is helpful if you need access to more cash, such as when you are doing a major renovation.
• Lower interest rate. HELOCs offer some of the lowest financing costs you can get. It’s typically much less expensive than a personal loan or a credit card.
• Flexible distribution of funds. HELOCs are a credit line. During the draw period (typically 10 years), you’re able to borrow up to your limit and pay it back or just pay interest. If you pay off what you borrow during the draw period, you can borrow against the credit line again. This is especially useful if you don’t know how much you are going to spend on a project, such as a home renovation (after all, the cost of living by state can vary widely).
• Repayment terms may be flexible. Once the draw period ends, you’re left with a repayment period of, say, 10 or 20 years. You can use the HELOC repayment calculator to see what your monthly payments would be based on your interest rate and repayment period.
HELOC Requirements
Qualifying for a HELOC is similar to qualifying for a home mortgage loan or a mortgage refinance. You’ll need to be approved for the line of credit. Here’s what lenders are looking for:
• Home equity. Since the combined loan-to-value (CLTV) ratio max is around 80% to 85%, you’ll usually need at least 15% equity in your home to get a HELOC.
• Low debt. Your debt-to-income (DTI) ratio needs to be low enough so that you’re able to take on the payment that the HELOC brings.
• Proof of income. You need a reliable source of income to be able to qualify for the monthly debt payment.
• Good credit. A good credit score not only helps you qualify, but also to qualify for the best rates.
HELOC Process
When it comes to getting a HELOC, you’ll want to arm yourself with as much knowledge as you can. These steps can help.
1. Estimate the maximum credit line amount. You do this by multiplying the market value of your home by 80% (.80). For example, if your home is worth $500,000, multiplying it by .80 will give you $400,000. This is an estimate for the maximum amount the lender will loan you with the home as collateral.
2. Find the difference. Subtract the amount of your current mortgage from the calculation above (80% of the market value). If you owe $300,000 on an existing mortgage and the max credit line amount is $400,000, you have $100,000 left for a HELOC. If this amount seems close to what you want, you could start talking to a lender.
3. Shop around for a lender. Submit your information to multiple lenders and see what terms they can offer you. Pay attention to origination fees, APR, term, and other requirements (like how the appraisal is conducted). These can vary from lender to lender. Shopping around for a lender within a 45-day window only counts as a single inquiry on your credit report, so talk to as many lenders as you can handle. (That’s just one of the helpful tips to qualify for a mortgage you can find in a home loan help center.)
4. Apply for a HELOC. During the shopping and mortgage preapproval process, you may have already submitted your information to multiple lenders and prequalified for a HELOC. A full application will complete that process by verifying the information you supplied the lender.
5. Get your property evaluated. Since the credit line is based on the property’s value, the lender will want to find that number in one way or another. They’ll either schedule an appraisal or see if your property qualifies for an automated valuation model (AVM) appraisal.
6. Go through underwriting and close. Your underwriter will evaluate your financials and make a final lending decision. You may be asked for additional documentation or explanation about your application. Fulfill these requests as soon as you can. Once the lender gives the go-ahead for your HELOC, you can close and start using it.
HELOC Example
If your home is worth $500,000, and you have a $300,000 mortgage, you may be able to get up to $100,000 in funds. Here how the math works out:
Multiply the market value of the home by 80% ($500,000 x .80) = $400,000. $400,000 is the maximum combined loan-to-value ratio, or how much you can borrow against your house.
With the existing mortgage at $300,000, that potentially leaves $100,000 for the HELOC. A $100,000 HELOC with a 9.00% APR and 10-year repayment period results in a payment of $1,266.76. This is the repayment amount, not the amount you’ll pay during the draw period. You do have to qualify for the repayment amount to be able to gain access to the $100,000 HELOC.
Tips on HELOCs
HELOCs need to be managed with care. Although the default rate is low on HELOCs, it is still possible to get behind on bills and lose your home by taking on too much debt.
Pay attention to your repayment period. The longer the repayment period, the more you’ll pay in interest, even if you score a great interest rate. A 20-year HELOC has a much more attractive monthly payment, but it will cost much more than a 10-year repayment plan.
Make sure you can afford the full repayment amount. During the draw period, you’ll likely be paying interest only. This is a much lower payment than the one you’ll be making during the repayment period. It can come as a shock when you need to pay a significant amount more every month when you go from the draw period to the repayment period. (Even better, try to pay it off as soon as you can.)
Select a shorter repayment period if you want to save money. A shorter repayment period helps you pay off the balance faster and costs much less than a HELOC with a longer repayment term.
Select a longer repayment period if you want the lowest monthly payment. Even though you’ll pay more in the end, a longer repayment period creates a smaller monthly payment. If you’re selling the house and planning to pay off the HELOC from proceeds of the sale, this option might make sense.
The Takeaway
HELOCs can be a powerful financing tool. However, they need to be planned for and used carefully. Your house is at risk if you cannot make the payments on a HELOC, so be sure you can afford the monthly payment, even in a worst-case scenario.
To give yourself a head start, calculating approximately how much your payment will be and what the costs of borrowing money are can help you manage the HELOC to your advantage.
SoFi now partners with Spring EQ to offer flexible HELOCs. Our HELOC options allow you to access up to 90% of your home’s value, or $500,000, at competitively lower rates. And the application process is quick and convenient.
Unlock your home’s value with a home equity line of credit brokered by SoFi.
FAQ
How do I calculate my HELOC payment?
The easiest way to calculate a HELOC payment is to use a HELOC repayment calculator. Submit your amount, interest rate, and term to see what your monthly payment would be and how much interest you would pay throughout the life of the HELOC.
What is the monthly payment on a $100,000 home equity line of credit?
The monthly payment on a $100,000 HELOC with a 9.00% interest rate and a 10-year repayment period would be $1,266.76. This assumes you’re in the repayment period, with principal and interest included in the monthly payment.
What is the monthly payment on a $75,000 HELOC?
The monthly payment on a $75,000 HELOC with a 9.00% interest rate and a 10-year repayment period is $950.07. This assumes you’re in the repayment period, with principal and interest included in the monthly payment.
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