A HELOC starts cheap and gets more expensive when the draw period ends; a home equity loan stays the same. See both payments.
How it works
HELOC draw payment = amount × rate ÷ 12, interest only
This assumes the full amount is drawn at the start and the HELOC rate stays where it is. After the draw period the balance is repaid over the repayment period, so the payment rises. The home equity loan is a fixed payment over its term.
Keep in mind
- Most HELOC rates move with the prime rate, so the real payments will change.
- If you draw only part of the line, the interest-only payment is lower; some HELOCs let you lock part of the balance at a fixed rate.
Questions
How much would a $100,000 HELOC cost per month?
During the draw period, usually interest only: the amount you have drawn times the rate, divided by 12. So the payment follows the balance and, on a variable-rate line, the rate. When repayment begins, principal is added and the payment rises. Enter the rate above to see $25,000 to $250,000 side by side, with a fixed home equity loan for comparison.
Is a HELOC or a home equity loan better?
A HELOC suits money you’ll use over time and repay flexibly; a home equity loan suits a one-time amount you want to repay on a fixed schedule. Both keep your first mortgage in place.
Why does the HELOC payment jump?
During the draw period many HELOCs need interest only. When it ends, you start repaying principal over the remaining years, so the payment rises.
How much can I borrow?
Both are limited by the lender’s combined loan-to-value limit on your home. The cash-out refinance calculator shows the equity available at a given limit.
