HELOC Calculator
Estimate a Home Equity Line of Credit's draw-period interest-only and repayment-period amortised monthly payments and total interest.
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At a glance:A HELOC is a revolving credit secured by home equity — draw within the limit, pay interest only on what is used, like a property-backed credit card. Two phases: draw period (10–15y) interest-only (monthly = balance × monthly rate); repayment period (10–20y) principal+interest amortised. So the payment jumps sharply from interest-only to full amortisation. This is a simplified fixed-rate model; real HELOCs are often variable with caps and fees — terms per lender.
Formula
Monthly rate r = annual rate ÷ 100 ÷ 12.
Draw payment = balance × r (interest only).
Repayment payment = balance × r × (1+r)ⁿ ÷ ((1+r)ⁿ − 1), n = years × 12.
Total interest = draw-period interest + repayment-period interest.
$$\text{Draw Period Payment} = \text{Balance} \times r, \quad r = \dfrac{\text{annual rate}}{12}$$$$\text{Repayment Payment} = \dfrac{\text{Balance} \times r (1+r)^n}{(1+r)^n - 1}, \quad n = \text{repay years} \times 12$$How to Use
- Enter the current balance and annual rate.
- Enter the interest-only draw period and the amortisation repayment period.
- View both monthly payments and the interest per phase and total.
Balance HK$1,000,000, 10y draw (interest-only), 15y repayment: payments by rate
| Annual rate | Draw payment (HK$) | Repayment payment (HK$) | Gap (HK$) |
|---|---|---|---|
| 4% | 3,333 | 7,397 | 4,064 |
| 6% | 5,000 | 8,439 | 3,439 |
| 8% | 6,667 | 9,557 | 2,890 |
| 10% | 8,333 | 10,746 | 2,413 |
At any rate, repayment payment far exceeds draw payment — the principal is untouched in the draw period. At 6%, payment jumps HK$5,000 → HK$8,439.
Case Studies
Case 1: The draw-vs-repayment payment cliff
An owner draws HK$1,000,000, 6%, 10y draw, 15y repayment. During the draw period he pays only HK$5,000/month — easy.
At the end, clearing 1M over 15 years, the payment jumps to ~HK$8,439 (+HK$3,439). With no principal repaid in 10 years, the cliff hits cash flow hard; total interest ~HK$1,118,942 (600k draw + ~519k repayment).
Lesson: the low draw payment is a 'sweetener trap' — principal never shrinks, interest keeps accruing, long-term cost is sizeable.
Case 2: Repay principal in the draw period
Same loan 1M, 6%, 10y draw. But this owner pays extra principal monthly, cutting the balance 1M → 400k over 10 years.
In repayment he amortises only 400k over 15 years → ~HK$3,375/month, far below 8,439, and far less total interest.
Lesson: the best defence against the cliff is not minimum interest-only payments but active principal repayment during the draw period — lower payment later and save large interest. Never treat the low draw payment as the permanent norm.
FAQ
Why is the repayment payment far higher than the draw payment?
In the draw period you pay only interest; principal is untouched. In repayment you must clear the whole principal plus interest within a shorter term, so the monthly payment jumps. If no principal is repaid during the draw period, the repayment burden is substantial.
HELOC vs a home equity loan?
A HELOC is revolving — draw as needed within the limit, interest only on the drawn amount, like a credit card. A home equity loan is a lump sum paid once, amortised from day one at a fixed (or set) rate, with no interest-only stage — better for a one-off need (a renovation, debt consolidation). A HELOC is flexible but usually variable-rate, so watch rate risk.
How to ease the repayment burden?
The most effective way is to repay principal during the draw period to lower the balance entering repayment; you can also seek a longer repayment term to spread the monthly payment, at the cost of more total interest. Plan early to avoid the payment shock.
HELOC vs home equity loan vs a traditional mortgage?
All three are property-secured but differ in draw and structure. A HELOC is a revolving credit line — draw/repay as needed within the limit, interest only on the used amount, typically interest-only in the draw period then amortised, often variable. A home equity loan is a one-off lump sum amortised from day one at a fixed/set rate, no interest-only stage — for clear one-time needs. A traditional mortgage is the loan taken to buy the property, amortised from closing. In short: HELOC = flexible draw/repay, interest-first; home equity loan = lump sum, fixed amortisation; traditional mortgage = the main purchase loan. Choose by whether the need is one-off or ongoing, rate tolerance, and the post-draw payment jump. Note Hong Kong top-up/second mortgages may not match a US-style HELOC — terms per the lender; this uses the typical draw-interest-only + repayment model for illustration.
How to avoid the payment shock at repayment?
The biggest risk is the 'payment shock' when the draw period ends: payment leaps from interest-only to principal+interest (e.g. HK$5,000 → HK$8,439). To avoid or soften it: (1) repay principal during the draw period — extra principal early sharply cuts the repayment balance and payment (e.g. balance 1M → 400k cuts payment ~8,439 → ~3,375) and total interest; (2) budget for the rise early — know when the draw ends and the new amount; (3) consider refinancing near the end into a better-term loan (longer term lowers payment but raises total interest); (4) watch variable-rate risk — rising market rates lift even the draw-period interest; (5) borrow only what you need with a repayment plan. Core: do not treat the low draw payment as permanent; repay principal and plan early to pass the repayment period safely.
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References
Content review: Calculatorism Finance Team. Results are for reference only; please refer to the relevant authorities for the official figures.