This **HELOC calculator** estimates your monthly home equity line of credit payment by considering the current line of credit balance, HELOC interest rate and term. There is in depth information on how to determine these payment details below the tool.

## How does the HELOC calculator work?

This financial application requires you to input these variables:

- Current line of credit balance (CLCB) which is the amount to be repaid;
- HELOC interest rate (HEIR);
- Payment term in years (PTYR).

The algorithm behind this *HELOC calculator* is based on the formulas explained here:

- Monthly interest paid = CLCB * HEIR / 12

- Monthly payment (principal + interest) = (CLCB*HEIR /1200)*((1+HEIR/1200)^(PTYR*12))/((1+HEIR/1200)^((PTYR*12) -1))

## What is HELOC?

HELOC is the abbreviation for home equity line of credit is a loan type that allows the borrower to take money from the lender by securing the loan with the equity in his house. Practically the borrower uses his home as collateral to get some cash to finance different stuff such as home improvements, health services, children education. One of its particularities is that once a maximum allowable balance is agreed by the lender, the homeowner may draw any amount at his discretion not greater than the limit established. Usually the term to repay the HELOC balance may vary from few years to up to 20 years.

Please note that HELOC is different than a traditional home equity loan since:

- A home equity line of credit does not compel the homeowner to take the entire sum up front, but puts a line of credit at the discretion of the borrower while he may take any amount equal or smaller than the limit established. It is similar to a credit card scheme.
- In case of a conventional home equity loan the borrower has to take all the amount agreed in the contract as a single lump sum.

## Example of a calculation

An individual wants to take by a HELOC scheme an amount of $100,000 over 15 years at an interest rate of 3.5%:

■ Monthly interest paid = $333.33

■ Monthly payment (interest + principal) = $739.69

■ Payment for 15 years (interest + principal) = $133,143.83

23 Feb, 2015