Line of credit calculator

Calculate your line of credit and more

Use this line of credit calculator to determine how big a line of credit you may qualify to receive. The line of credit is based on a percentage of the value of the home. The more the home is worth, the larger the line of credit. Of course, the final line of credit received will take into account any outstanding mortgages there might be. This includes first mortgages, second mortgages, and any other debt secured by the home.

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Line of credit calculator

What is a HELOC?

A home equity line of credit, or HELOC, is a type of home equity loan that works like a credit card. You’re given a line of credit that’s available for a set time frame, usually up to 10 years. This is called the draw period, and you can withdraw money as you need it.

You can get a HELOC with an interest-only draw period or one with a draw period where you make interest and principal payments. The latter option helps you pay off the loan faster, which can save you on interest, especially in a rising-rate environment.

Unlike a home equity loan, which is paid out in a lump sum, a line of credit revolves so as you pay off the line of credit principal, you can use the HELOC again. When a line of credit has expired, you enter the repayment period, which can last up to 20 years. You’ll pay back the outstanding balance that you borrowed, as well as interest accrued. A lender may allow a renewal of the credit line.

The borrower accesses the line of credit using specially issued checks or a card that looks like a credit card. Lenders often require you to take an initial advance when you set up the loan, withdraw a minimum amount each time you dip into it, and keep a minimum amount outstanding.

HELOCs and interest rates

A HELOC has a variable interest rate that is tied to a benchmark interest rate, such as The Wall Street Journal Prime Rate. As the prime rate moves up or down, so does your HELOC rate. Payments will vary depending on the interest rate and how much credit you have used.

Some lenders will allow you to convert an adjustable-rate HELOC into a fixed-rate HELOC. A line of credit calculator can show you what payments might look like over time -- particularly as your home’s value changes.

When it’s best to use a HELOC

A HELOC can be used for anything, though tax deductibility may be limited. The most common reasons to use a HELOC include:

Funding home improvements that add value to your home

  • Paying college expenses
  • Consolidating high-interest credit card debt
  • Buying a second property or vacation home
  • Paying off emergency expenses (i.e., a major surgery)

A HELOC is ideal for borrowers who have smaller expenses that are spread out over time, such as multiple home renovations over a number of years. For large, up-front expenses, you might be better off with a home equity loan that pays out a lump sum and comes with a fixed interest rate.

Using a HELOC for a substantial home improvement project may also be tax-deductible under the new tax law, too. However, if you plan to use a HELOC to consolidate credit cards or pay down other debts, you won’t be able to deduct the interest payments from your taxable income.

Not everyone who has substantial equity in their homes should tap it. Using a HELOC to fund vacations, buy a car, or extravagant purchases could land you deeper in debt -- and put your home at greater risk of foreclosure if you can’t repay the loan.

How to use a line of credit calculator

A line of credit calculator to determine how big a line of credit you may qualify to receive. The line of credit is based on a percentage of the value of the home. The more the home is worth, the larger the line of credit.

The final line of credit received will take into account any outstanding mortgages. This includes first mortgages, second mortgages and any other debt secured by the home. A HELOC calculator helps you see, at a glance, the maximum line of credit you’d qualify for with loan-to-value ratios above the standard minimum of 80 percent.

You can use a home equity loan vs. HELOC calculator to determine which option is best for your needs.

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