Free HELOC Calculator 2026

What Is a HELOC?

A HELOC (Home Equity Line of Credit) is a revolving line of credit secured by your home's equity. Unlike a traditional loan that gives you a lump sum, a HELOC lets you draw money as needed during a "draw period" (typically 5-10 years), then repay over a "repayment period" (typically 10-20 years).

Think of it like a credit card, but with your home as collateral — and much lower interest rates because it's secured.

How Much Can You Borrow?

Most lenders allow borrowing up to 80-85% of your home's value minus your existing mortgage:

Max HELOC = (Home Value × 0.80) - Existing Mortgage

• $400K home, $250K mortgage: ($400K × 0.80) - $250K = $70K max
• $400K home, $100K mortgage: ($400K × 0.80) - $100K = $220K max
• $600K home, $350K mortgage: ($600K × 0.80) - $350K = $130K max

Some lenders go to 90% CLTV for qualified borrowers with excellent credit.

HELOC vs Home Equity Loan: Which Is Better?

• HELOC: Variable rate, flexible draws and paydowns, interest-only during draw period, rate tied to prime (typically prime + 0-2%)
• Home equity loan: Fixed rate, one lump-sum disbursement, predictable fixed payments, no draw/repay flexibility

Choose HELOC when: You need flexibility (home renovations over time, business expenses, ongoing projects). You want to draw and pay down as needed.

Choose home equity loan when: You know exactly how much you need upfront. You want predictable, fixed payments. You prefer simplicity.

HELOC Rates in 2026

• Typical range: Prime + 0% to Prime + 3% (prime rate in 2026 is ~8.5%)
• Best rates: 7.5-9% APR for borrowers with 740+ credit, 50% CLTV or less
• Average rates: 8.5-10% APR for typical borrowers
• High CLTV rates: 9.5-12% APR for borrowers with 75%+ CLTV
• Rate type: Almost always variable — payments can increase or decrease with the prime rate

HELOC Draw Period vs Repayment Period

• Draw period (5-10 years): You can draw money, make minimum payments (often interest-only), and pay down the balance
• Repayment period (10-20 years): No more draws allowed. Full balance is amortized over monthly payments. Some HELOCs convert to a lump-sum balloon payment at end of draw period

Warning: During the draw period with interest-only payments, your balance may not decrease at all if you only pay interest. At the start of repayment, your payment can spike dramatically.

Best Uses for a HELOC

• Home improvements: Kitchen remodel, bathroom, additions — things that increase home value. Interest may be tax-deductible (consult a tax advisor)
• Debt consolidation: Pay off credit cards or high-interest loans with HELOC funds at lower rate. Be disciplined — don't run up cards again
• Emergency fund substitute: If you don't have a large emergency fund, a HELOC provides a backup line. Just don't use it unless necessary
• Education expenses: Fund college costs at lower rates than Parent PLUS or private loans
• Business capital: Entrepreneurs can access home equity for business investments

HELOC Risks and How to Manage Them

• Variable rate risk: If prime rate rises, your HELOC payment increases. Budget for potential 2-3% rate swings
• Your home is collateral: Defaulting can lead to foreclosure. Only borrow what you can comfortably repay
• Bank can freeze the line: If home values drop significantly or your credit worsens, banks can reduce or freeze your credit line
• Minimum payment trap: Low minimum payments during draw period may not reduce principal. Pay more than minimum to actually pay down the balance
• Don't use as lifestyle funding: Using HELOC for vacations, cars, or consumption is dangerous — you're spending future equity