A home equity line of credit has two halves. While you can still draw on it you usually pay interest only, which is cheap. When the draw period ends you have to clear the balance over a fixed number of years, and the monthly payment can rise sharply. This works out by how much, for your figures, and what it would become if your rate rose.
What this assumes
- That you pay interest only until the draw period ends. Most home equity lines work this way. Some ask for interest plus part of the principal, and if yours does, your payment now is higher than shown and the change is smaller.
- That your balance is the same on the day the draw period ends: nothing more drawn, nothing paid off early. Paying anything above the interest lowers the figure on the right.
- That your rate stays where it is. Almost no home equity line rate does, which is what the table of higher rates is for rather than an optional extra.
This is arithmetic on the numbers you entered. It is not an offer, not a quote, and not a statement about what any lender will do. Your own loan agreement is what governs your payment.
This calculator works out the answer in your browser. It does not send what you type to this site or to anyone else, and it does not save it anywhere.
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How the two figures are worked out
The payment on the left is interest only: your balance multiplied by your annual rate, divided by twelve. If that figure does not match your statement, your lender is probably asking for principal as well as interest during the draw period, and the change when it ends will be smaller than shown here.
The payment on the right clears the whole balance over the repayment period, interest included, the way a mortgage payment does. Nothing is left owing at the end of it.
Why the change catches people out
The draw period on these lines is commonly ten years, so the payment that changes is one you have been making for a long time by then, and the change arrives with no warning letter and no renegotiation. It is in the agreement from the first day. Working it out early is the only part of it you control.
The rate matters twice over. Almost all of these lines are variable, so a rate rise lifts what you pay now and what you will pay later. That is why the table shows both columns rather than only the one after the draw period.
What this does not tell you
It is arithmetic on the numbers you give it. It is not an offer, not a quote, and not a statement about what any lender will do. Your own loan agreement governs your payment, including whether the draw period can be extended, whether the balance can be converted to a fixed rate, and what happens if you keep drawing.
We also do not know your balance on the day the draw period ends. This assumes it is the balance you entered. Paying anything above the interest before then lowers the figure on the right.
You can read how we produce the figures on this site, or go back to our calculators.