Updated: November 17, 2025
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A home equity line of credit (HELOC) lets you borrow against your home's equity. HELOCs work like credit cards, offering a revolving credit line based on your home's value minus your outstanding mortgage balance.
Your home is likely one of your biggest investments. A HELOC lets you tap this equity for home improvements, debt consolidation or college expenses.
MoneyGeek's calculator estimates how much you can borrow, your potential monthly payments and your loan-to-value (LTV) ratio.
HELOC payments shift throughout the loan's life. Variable rates, draw periods and rate caps all change what you pay monthly.
APR drives your payment: Your rate adjusts with market conditions. When rates rise, your payment climbs. When they fall, you pay less.
Draw period keeps payments low: You make interest-only payments during the draw period, usually 10 years. Once this ends, you'll repay both principal and interest. Expect your payment to double or triple.
Rate caps protect you: Lenders cap how high your rate can go. Even if the prime rate spikes, your HELOC can't exceed this maximum.
Your rate and borrowing limit depend on factors you control and market conditions you don't.
A 760 credit score gets you rates two to three percentage points lower than a 650 score. Lenders reserve their best terms for borrowers with excellent credit.
Your home's market value sets your borrowing ceiling. A $400,000 home gives you access to more equity than a $200,000 home with the same mortgage balance.
Lenders calculate your debt-to-income ratio: total monthly debt divided by gross income. Keep yours below 43% to qualify for most HELOCs. High debt shrinks your credit line or raises your rate.
Federal Reserve decisions and economic conditions push HELOC rates up or down. You can't control this, but you can time your application strategically.
One lender caps LTV at 80%. Another goes to 85%. Shop around because policies vary widely between lenders.
Your LTV ratio shows how much you owe versus what your home's worth. Lenders use this to measure risk. Lower LTV means more borrowing power and better rates.
A HELOC works for some situations but not others. We analyzed two borrowers to show when it makes sense.
Emma runs a graphic design business from her home studio. She's renovating in phases: new windows and workspace first, kitchen upgrade next year. Total cost: $75,000, but she doesn't need it all now.
Emma earns good money, but her freelance income swings monthly. She needs borrowing flexibility and payment options that adapt to her cash flow.
A HELOC is a good idea because Emma draws funds as each project starts and pays interest only on what she borrows. During slow months, she can manage her budget with interest-only payments instead of paying down principal.
Lucas opened a photography gallery but took on $45,000 in credit card debt at 22% APR while building his business. He also owes $15,000 on an auto loan at 8%. His gallery now breaks even, and he wants one fixed payment with a lower rate.
A HELOC isn't a good idea. Lucas needs a home equity loan instead. He'll get $60,000 upfront to clear all debt immediately, plus a fixed rate around 7%, much better than his credit cards. One payment replaces five, and he won't risk rate increases like with a HELOC.
Three products let you borrow against your home: HELOCs, home equity loans and cash-out refinances. All share key traits:
But these products work differently. Here's how.
A home equity loan gives you a lump sum upfront by borrowing against your home's equity. Most carry fixed rates. Here's what separates them from HELOCs:
Type of Credit | HELOCs work like credit cards: borrow what you need, when you need it. Home equity loans give you everything upfront. |
Interest Rate | HELOCs have variable rates that change with the market. Home equity loans lock in a fixed rate from day one. |
Payment Structure | HELOCs split into draw and repayment periods. You can pay interest-only at first. Home equity loans require fixed monthly payments of principal and interest from the start. |
A cash-out refinance replaces your current mortgage with a bigger one. You keep the difference as cash. Here's how they compare to HELOCs:
Type of Borrowing | HELOCs give you a revolving credit line, where you draw funds as needed. Cash-out refinances hand you a lump sum and restart your mortgage. |
Impact on Mortgage | Cash-out refinances replace your original mortgage with new terms and a potentially longer timeline. HELOCs function as second mortgages, and your first mortgage stays untouched. |
Interest Rates | HELOCs carry variable rates that shift with market conditions. Cash-out refinances typically offer fixed rates. |
If you enter your figures into a HELOC calculator and don't like the results that come back, it may mean you need to sit tight for another couple of years before tapping your home equity. Not only are there other loan options for you to consider in the meantime, but making regular payments on your mortgage and natural home price appreciation will increase the amount of equity you have over time. — Timothy Manni, Mortgage and Real Estate Consultant
A HELOC calculator can make your borrowing experience smoother. We’ve compiled common questions to help you get the most out of this tool and decide if a HELOC is suitable for your financial needs.
The calculator uses your home's value, outstanding mortgage balance, credit score and other financial details to estimate your maximum credit line.
Your credit score range determines your interest rate. Higher scores unlock lower rates, which shrink your monthly payment and total borrowing costs.
Your payoff goal shows what you'll pay monthly during repayment. Want to pay off your HELOC in 10 years instead of 20? The calculator reveals how much more you'll owe each month.
HELOC rates adjust with the market. Run different APR scenarios in the calculator to see how rate swings change your payment. This shows your best-case and worst-case monthly costs.
Our calculator shows minimum payments only. For additional payment scenarios, talk to your lender or a financial advisor. They can model exactly how extra payments reduce your principal and interest costs.
About Zachary Romeo, CBCA
Zachary Romeo is a certified Commercial Banking and Credit Analyst (CBCA), and the Head of Loans and Banking at MoneyGeek. Previously, he led production teams for some of the largest online informational resources in higher education, with over 13 years of experience in editorial production.
Romeo has a bachelor's degree in biological engineering from Cornell University. He geeks out on minimizing personal debt and helping others do the same through people-first content.
