HELOC Payoff Calculator

A HELOC is a revolving line secured by your house, and it repays nothing like the mortgage sitting in front of it. A mortgage payment is fixed on day one and splits between interest and principal from the first month. A HELOC has two lives, and only the second one repays anything.

The rate is variable throughout. It is the prime rate plus a margin set in your agreement, so it moves whenever the Federal Reserve moves, on the schedule your lender specifies. Interest is charged on the balance you actually carry, so the number that decides your cost is the balance — and during the draw period, the required payment does nothing to it.

That is the whole mechanism. The required payment during the draw period equals the month's interest. You pay it, the interest is satisfied, and the balance is exactly what it was. Ten years of those payments and you owe what you owed at the start. The calculator above runs the interest-only phase explicitly for this reason: with the extra payment set to zero it shows you the total you will hand the lender before the balance moves by a dollar.

When the draw period ends the lender recalculates. It takes the balance outstanding on that day, applies the current rate, and solves for the level payment that retires it over the repayment term — the same amortization math behind any fixed-term loan, applied years after you signed. The rate keeps floating, so the payment can still move, but its job has changed: it is now killing principal on a deadline.

A HELOC term is written as two numbers — commonly a 10-year draw period followed by a 20-year repayment period. They are not two halves of the same thing.

The draw period is a credit card with your house as collateral. You borrow what you want up to the limit, repay it, borrow it again. The required payment is interest only, which makes the line feel cheap and makes the balance sticky. Principal payments are allowed, and they are the entire lever you have: a dollar paid here reduces the interest charged in every remaining month of the draw period and reduces the balance the repayment payment is calculated from. Nothing you do later has that double effect.

The repayment period is a loan. The line is closed to new borrowing, the payment is recalculated to amortize the balance, and you are on a schedule. For a borrower who paid the minimum for ten years, the payment jumps — the interest-only figure covered only the rate; the new figure has to retire the whole balance too, and the shorter the repayment period, the fewer payments that principal is divided across. Set the extra payment to zero above and look at the two numbers side by side. That gap has a name in lender documents and in nobody's household budget: payment shock.

The gap is also why the two products in the home equity loan vs. HELOC comparison diverge so far on total cost despite quoting similar rates. The fixed loan starts amortizing in month one. The line spends a decade not doing that, and the interest on a balance that never falls is the price of the flexibility.

Not always, and the answer turns on three things the calculator can't see: what else you owe, where the rate is heading, and how much of the balance sits against your equity.

Rank it by rate, like any other debt. A HELOC is secured, so its rate is usually well below what your credit cards charge. Extra dollars buy the most interest saved at the highest rate, which means a card balance almost always outranks the line. Run your debts through the avalanche calculator before you decide the HELOC is the problem.

Then override for the two risks a rate ranking ignores. The first is variability: a fixed-rate card at 22% cannot become a 27% card, but a HELOC at 8.5% can follow prime anywhere. Enter a higher repayment rate above and see what the exposure costs you — that number, not a forecast, is the size of the risk. The second is the collateral. Missing payments on an unsecured card ends in collections; missing them on a HELOC ends in foreclosure. A large balance against thin equity deserves to jump the queue no matter what its rate says.

If you're still in the draw period, pay principal now. This is the version of the question with an unambiguous answer. Principal paid during the draw period saves interest for the rest of the draw period and shrinks the balance the repayment payment is built from, so it defuses the payment shock at the same time. Waiting until repayment starts collects neither benefit. The extra payment calculator prices a steady monthly amount against any balance, and if you're holding a bonus rather than a monthly surplus, lump sum vs. extra payment settles which way to deploy it.

Two things worth checking before you send the money. Confirm the lender applies extra payments to principal rather than parking them as prepaid interest — the statement the following month will tell you. And check whether closing the line early triggers a fee, which some lenders charge if the account closes within the first few years. Neither is common enough to stop you. Both are cheap to verify and expensive to assume.