PmtCalcTwo phases, two payments
- Draw period (often 10 years): you can borrow, and the minimum payment is usually interest only: balance × rate ÷ 12.
- Repayment period (often 20 years): no more borrowing, and the balance is paid off with principal and interest like a regular loan.
The switch can raise the payment sharply. Planning for it, or paying principal during the draw period, avoids payment shock.
Example
Drawing $50,000 at 8.5% costs about $354.17 a month interest-only. When a 20-year repayment period starts, the payment becomes $433.91.
Frequently asked questions
Are HELOC rates fixed?
Usually not. Most HELOCs are variable, tied to the prime rate, so payments change when rates change. Some lenders let you lock part of the balance at a fixed rate.
HELOC or home equity loan?
A home equity loan is a lump sum with a fixed rate and payment, like a second mortgage. A HELOC is a reusable credit line with a variable rate. For a home equity loan, use the loan payment calculator.
Can I pay principal during the draw period?
Yes, almost always. It lowers both your interest cost and the payment once repayment begins.
Sources
- CFPB: What is a home equity line of credit (HELOC)?
- Federal Reserve H.15: Selected Interest Rates (bank prime rate)
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