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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, when you can withdraw money as you need it.

HELOCs usually only require interest payments during the draw period, though you can make interest and principal payments during this time if you choose. Some lenders require you to make both payments during the draw period. The latter 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 the draw period ends, you enter the repayment period, which can last up to 20 years. During this time, you’ll pay back the outstanding balance you borrowed, as well as interest accrued. Your lender might allow you to renew the credit line, as well.

You’ll access 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.

How to use a line of credit calculator

A line of credit calculator can help you determine how much you might qualify for if you were to obtain a HELOC. The line of credit is based on a percentage of the value of your home as well as any outstanding mortgages. Generally, the more the home is worth, the larger the line of credit.

In addition to a line of credit calculator, you can use a home equity loan vs. HELOC calculator to determine which option is better for your needs.

How to calculate home equity

Your home equity is the difference between your home’s value and how much you owe on any mortgages and home equity loans secured by the property.

If your home were valued at $400,000, say, and you owe $300,000, your equity would be $100,000. If your bank allows you to tap 90 percent of your equity, that means you could run your total debt on the property up to $360,000. If you owe $300,000 on your mortgage, you could tap up to $60,000 with a HELOC.

HELOC 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. Your payments will vary depending on the interest rate and how much credit you have used.

Some lenders 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. See the latest HELOC rates.

When it’s best to use a HELOC

A HELOC can be used for anything, though tax deductibility might be limited. The most common reasons to use a HELOC include:
  • Funding home improvements that add value to your home: A new kitchen or bathroom can pay off in the long run, so this type of expense is a legitimate use of a HELOC.
  • Paying college expenses: A HELOC might be a better option than taking out private student loans; however, federal student loans carry low interest rates and are likely the best choice.
  • Consolidating high-interest credit card debt: A word of warning: Make sure you don’t simply run up more credit card debt.
  • Buying a second property or vacation home: Qualifying for a mortgage on a second home can be difficult, but a HELOC can help pave the way.
  • Paying off emergency expenses (e.g., a major surgery): A word of caution here: Make sure the expense really is an emergency. Tapping home equity to fund ongoing expenses is a risky move.

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, upfront 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 might also be tax-deductible. 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 or buy a car or extravagant purchases could land you deeper in debt, and put your home at risk of foreclosure if you can’t repay the loan.