Home Equity Loan & HELOC Calculator

HELOC for ongoing access (renovation in phases, opportunistic investing, emergency fund) — pay only on what you draw, variable rate. Home equity loan for one-time lump sum (consolidation, single big project) — fixed rate, predictable payment. Most homeowners benefit from HELOC flexibility unless they need a one-time predictable amount.

Most lenders allow combined CLTV (1st mortgage + 2nd lien) up to 80-85% of home value. Some specialty lenders go to 90% at premium rates. VA cash-out: 100% CLTV. Example: $500K home with $300K mortgage allows $400-425K total debt = $100-125K available equity. Veterans can borrow up to $200K (the full equity).

Only if funds are used to buy, build, or substantially improve the home that secures the loan (TCJA rules effective 2018). NOT deductible for debt consolidation, college, vacation, or business use. Document the use carefully — IRS audit can require evidence. Combined mortgage interest cap: $750K post-TCJA.

WSJ Prime rate is 7.50% in early 2026 (set by major banks based on Federal Reserve Federal Funds rate). HELOC rates are typically Prime + 0.5% to 2% margin = 8% to 9.5%. When the Fed raises rates, HELOC rates rise 1-2 months later. When Fed cuts, HELOC rates drop similarly.

Critical: compare existing mortgage rate to current rates. If existing rate is LOWER than current 30-year fixed (~6.30%), KEEP the existing mortgage and use HELOC. If existing rate is HIGHER than current, cash-out refi makes sense. Most 2020-2021 buyers locked sub-4% rates — losing that to cash-out refi at 6%+ is a major financial mistake.

$0 to $1,500 typical — much lower than mortgage refi (2-5% of loan). Some lenders charge no closing costs but require keeping the line open 3-5 years (early-closure fee). Annual fee: $0-$100. Inactivity fee: $50-100/year if you don't draw. Compare 3+ lenders; credit unions often offer the best HELOC terms.

Yes — HELOCs and home equity loans are secured by your home. Default leads to foreclosure. The risk is highest with HELOCs because variable rate increases can push payments above what you can afford. Conservative borrowers limit total debt service (1st mortgage + HELOC payment + property tax + insurance) to under 36% of gross income.

Most HELOCs are 10/20 — 10-year draw period (you can borrow up to your line, interest-only or low payments) followed by 20-year repayment (no more draws, principal + interest amortizes balance). Some are 5/15 or 10/15. Interest-only payments during draw can become a payment shock at end of draw period — plan ahead.