HELOC Payment Calculator: Draw Period, Repayment & Interest Explained
Calculate HELOC monthly payments for both the draw and repayment periods. Understand how variable rates work, what triggers payment increases, and how to compare HELOC vs. home equity loan.
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How HELOCs Work: Two Phases
A Home Equity Line of Credit (HELOC) has two distinct phases with different payment structures:
Draw Period (typically 5–10 years): - You can borrow up to your credit limit as needed, like a credit card - Minimum payments are usually interest-only - Rate is variable (tied to Prime Rate or SOFR)
Repayment Period (typically 10–20 years): - No more borrowing allowed - Monthly payments include both principal and interest - Payments are amortized over the repayment term
The shift from draw period to repayment period causes a significant payment jump — sometimes 2–3× the draw period payment. This "payment shock" catches many homeowners by surprise.
HELOC Payment Formulas
Draw Period (interest-only) Payment:
Monthly Payment = Outstanding Balance × (Annual Rate ÷ 12)
Example: $60,000 balance at 8.5% APR: $60,000 × (0.085 ÷ 12) = $60,000 × 0.00708 = $425/month
Repayment Period Payment:
Uses standard amortization formula over the remaining repayment term:
Monthly Payment = P × [r(1+r)^n] ÷ [(1+r)^n − 1]
Where P = outstanding balance at end of draw, r = monthly rate, n = repayment months
Example: $60,000 balance entering a 15-year repayment at 8.5%: Monthly Payment = $591/month (vs. $425 interest-only)
HELOC Payment Example Over Time
A $100,000 HELOC limit, fully drawn to $80,000 over the draw period, at 8.5% APR:
Payment jumps 39% when the repayment period begins. If rates have increased during the draw period, the shock is even larger.
Variable Rate Risk
Most HELOCs are tied to the Prime Rate (which follows the Fed Funds Rate). When the Fed raises rates, your HELOC rate rises:
Between 2022 and 2024, the Fed raised rates by 5.25%. A HELOC opened at 4% in 2021 might have jumped to 9%+ by 2024 — more than doubling interest payments on the same balance.
HELOC vs. Home Equity Loan
Typical HELOC Terms and Requirements
- Credit limit: Usually 80–90% of home equity (home value minus mortgage balance)
- Credit score requirement: 680+ for most lenders; 720+ for best rates
- LTV limit: Most lenders cap total borrowing (first + HELOC) at 80–85% of home value
- Rate: Prime Rate + 0–2% margin (varies by lender and creditworthiness)
- Annual fees: $50–$100 typically; some lenders waive
- Early closure fee: Some lenders charge if you close the HELOC within 2–3 years
When HELOCs Make Sense
- Funding a multi-phase home renovation where you draw funds over time
- Emergency fund backup (keeping a zero-balance HELOC open for optionality costs little)
- Business funding for self-employed homeowners with equity
- Bridge financing while waiting for a sale or refi to close
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Frequently Asked Questions
- How are HELOC payments calculated during the draw period?
- Draw period payment (interest-only) = Outstanding Balance × (Annual Rate ÷ 12). At $50,000 balance and 8.5% rate: $50,000 × (0.085/12) = $354/month. Only the interest accrues as a required payment — principal is optional during the draw period.
- Why do HELOC payments jump when the repayment period starts?
- During the draw period, you only pay interest. In the repayment period, you pay both principal and interest — amortized over 10–20 years. On a $70,000 balance, going from interest-only at 8.5% ($496/month) to 15-year amortization ($689/month) is a 39% payment increase.
- Are HELOC rates fixed or variable?
- Most HELOCs have variable rates tied to the Prime Rate. When the Federal Reserve raises rates, HELOC rates rise with it — often within one billing cycle. Some lenders offer fixed-rate options on portions of the balance, or a fixed-rate conversion at the start of the repayment period.
- How much can you borrow with a HELOC?
- Most lenders allow total borrowing (your first mortgage + HELOC) up to 80–85% of your home's appraised value. If your home is worth $400,000 and you owe $220,000 on your mortgage, you might qualify for a HELOC of up to $100,000–$120,000.
- What is the difference between a HELOC and a home equity loan?
- A HELOC is a revolving line of credit with a variable rate — draw what you need, when you need it, and pay variable interest-only during the draw period. A home equity loan is a lump sum with a fixed rate and fixed monthly payments from day one. HELOCs offer flexibility; home equity loans offer rate certainty.
Last updated 7/28/2026