Home Equity Calculator

Updated September 2026

The borrowing-power mistake almost everyone makes

Ask a homeowner how much they can borrow and most will take their equity — value minus mortgage — and take 80% of it. That is the wrong order of operations, and it is not a small difference.

CLTV means combined loan-to-value: every lien against the house counts, including the one you are applying for. The lender is answering one question — if everything goes wrong and we foreclose, is there enough house to cover every loan against it? — and the answer has to hold for the total, not for the new loan alone.

Two practical notes. Most banks that advertise the best rates cap CLTV at 80%; 85% and 90% exist but cost more and want stronger credit. And lenders appraise conservatively, so the value they use is often below what a listing site shows. That is what the appraisal haircut setting above is for — running the numbers 10% low is closer to what you will be offered than running them at the Zestimate.

How a HELOC actually works

A HELOC is a revolving line secured by your house, and it lives in two phases.

The draw period is typically 10 years, though 3 and 5 year draws are common with online lenders. During it you can borrow, repay and borrow again up to your limit. Interest accrues daily on what you have drawn, not on the whole line — a $150,000 line with $30,000 drawn costs interest on $30,000. The minimum payment on most HELOCs is interest only.

The repayment period is typically 10 to 20 years. You can no longer draw, and the payment becomes principal plus interest on whatever balance is left. That transition is where the payment jumps.

The rate is nearly always variable, quoted as the prime rate plus or minus a margin and adjusted monthly. A strong borrower at a bank where they already keep accounts can get a negative margin; someone shopping cold usually gets prime plus one or two points. Federal law requires a lifetime cap, commonly 18%, and many lenders offer a fixed-rate lock that converts part of the balance — but usually only during the draw, never after.

The interest-only trap

This is the single most expensive misunderstanding in the product. If you pay only the minimum on an interest-only HELOC for the entire draw period, your balance at the end is exactly what it was at the start. Ten years of payments, nothing repaid. The money was not wasted — you rented the cash — but people are genuinely shocked when the statement at year ten shows the original number.

The fix is in the calculator above: put an amount in the extra-principal field. During an interest-only draw, every extra dollar goes straight to the balance, and it does two things at once — it lowers the interest you pay from then on, and it lowers the payment you will face in repayment. Paying an extra $200 a month over a 10-year draw on a $60,000 balance removes $24,000 of principal before the repayment period even starts.

Payment shock: where it comes from

The jump when a draw period ends has two separate causes, and they can stack.

The first is amortization. You go from paying interest only to paying interest plus principal over a fixed schedule. How hard that hits depends entirely on the repayment length: a 10-year repayment hurts roughly twice as much as a 20-year one on the same balance.

The second is the rate. Ten years is a long time for a variable rate. Someone who opened a HELOC when prime was low and hit repayment after several rate increases faces both effects at once, and that is where the horror stories come from — payments doubling is entirely possible when a rate goes from 4% to 9.5% at the same moment principal starts amortizing.

Notice the pattern: the repayment length matters more than the rate. A shorter repayment period is the bigger risk, and it is the term most people never ask about. When you are quoted a HELOC, ask two questions — how long is the draw, and how long is the repayment — because "20 years" from one lender can mean 10 draw plus 20 repayment and from another 10 plus 10.

HELOC or a fixed home equity loan?

They are different products, and the confusion between them is constant.

The rough rule: a HELOC fits costs that arrive over time and amounts you are not sure about — a renovation done in stages, a business runway, a safety net you may never draw. A fixed home equity loan fits a known amount you need now and want a predictable payment on. Switch the product selector above to compare both on the same numbers.

A cash-out refinance is the third option, and for most homeowners in 2026 it is off the table for one reason: it replaces your first mortgage. If that mortgage is at 3%, giving it up to access equity at 7% is an expensive way to borrow, no matter how good the refinance rate looks on its own.

Costs, and the ones that are easy to miss

HELOC closing costs are genuinely low compared with a mortgage — often $0 to $2,000, and many lenders waive them entirely. What to check before signing:

• Early closure fee. Very common: if you close the line within 24 to 36 months, you repay the closing costs the lender waived, or a flat fee of a few hundred dollars.
• Annual fee. Often $50 or so, frequently waived if you bank there.
• Minimum initial draw. Some lenders require you to take a large share of the line at closing and hold it for months. That converts your flexible line into an expensive loan — you pay interest on money sitting in your checking account.
• Appraisal. $0 if the lender accepts an automated valuation, otherwise $500 or more.
• The DTI surprise. When qualifying you, most lenders do not count your interest-only payment. They assume a payment of 1–2% of the entire line, every month. On a $100,000 line that is $1,000–$2,000 of phantom debt in your ratio — a common reason applications fail.

Frequently asked questions