HELOC Calculator
Calculate your HELOC payment with payment shock warning. See how much you can borrow based on home equity. Compare HELOC vs cash-out refinance vs personal loan — with tax deductibility impact.
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How to Use This Calculator
HELOC Payment tab
The default tab. Enter your credit line, balance drawn, and interest rate to see your monthly payment. Toggle between interest-only (typical during the draw period) and fully amortizing (repayment period). The rate stress test shows how your payment changes if rates rise +1%, +2%, or +3% — critical because HELOCs have variable rates tied to Prime.
How Much Can I Borrow? tab
Enter your home value, mortgage balance, desired LTV, and credit tier. See your maximum HELOC line, available equity, estimated rate, and payment estimates at 25%/50%/75%/100% of your available credit.
HELOC vs Alternatives tab
The decision tool. Enter the amount you need and compare three options side-by-side: HELOC (variable rate, flexible draws), cash-out refinance (fixed rate, replaces your mortgage), and personal loan (no collateral, higher rate). Select your use of funds to see tax deductibility impact — interest is only deductible for home improvements.
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The Formula
HELOC payments depend on your draw phase and payment type:
Fully Amortizing Payment: PMT = P × r / (1 − (1 + r)−n)
where P = balance, r = monthly rate, n = repayment months
Maximum HELOC = Home Value × Max LTV − Mortgage Balance
After-Tax Effective Rate = Rate × (1 − Marginal Tax Rate)
(only if used for home improvement; OBBBA/TCJA permanent)
Payment shock occurs when the draw period ends: you transition from interest-only to fully amortizing payments. On a $75,000 balance at 8.75%, this means jumping from $547/mo to $663/mo — a 21% increase. The rate stress test shows the additional impact if rates have risen by then.
HELOC Rates in March 2026
After five Fed rate cuts since September 2024, HELOC rates have dropped to 3-year lows:
- Prime Rate: 6.75% (effective December 10, 2025)
- Average HELOC rate: 7.18% (Bankrate, March 2026)
- Excellent credit (740+): 6.25%–6.75%
- Good credit (670–739): 7.00%–7.75%
- Fair credit (580–669): 8.00%–9.50%
- Cash-out refi (30yr fixed): ~7.00%–7.25%
- Average home equity loan: 7.75%–7.92%
With the FOMC expected to hold rates steady through mid-2026, HELOC rates should remain in the 7–8% range for most borrowers.
Is HELOC Interest Tax Deductible?
Under OBBBA (which made TCJA provisions permanent), HELOC interest is deductible only if the funds are used to buy, build, or substantially improve the home securing the loan:
- Deductible: Kitchen remodel, roof replacement, adding a room, new HVAC, solar panels, finishing a basement
- Not deductible: Debt consolidation, education, vacation, car purchase, medical bills
- Combined limit: $750,000 total mortgage + HELOC debt ($375K MFS) — permanent under OBBBA
- Mixed use: If funds are used for both qualifying and non-qualifying purposes, you must allocate interest proportionally (IRS tracing rules)
- SALT cap: Raised to $40,000 ($20K MFS) for 2025–2029 under OBBBA
Keep receipts and contractor invoices. The IRS recommends a dedicated bank account for HELOC draws used for home improvement to simplify tracing.
Example: James & Sarah
James & Sarah, 42, San Diego. Home value $650,000. Mortgage balance $380,000 at 5.8%. Need $75,000 for a kitchen renovation.
Tab 2 — How Much Can They Borrow?
Available equity: $650K − $380K = $270,000.
Max HELOC at 80% LTV: $650K × 80% − $380K = $140,000.
Current LTV: 58.5%. CLTV with $75K HELOC: 70.0% — well within limits.
Tab 1 — HELOC Payment
$75,000 at 8.75% (their quoted rate).
Interest-only during draw: $547/mo.
Payment shock at repayment start: $663/mo (+$116/mo, +21%).
Rate stress: if Prime rises 2% → 10.75%, interest-only jumps to $672/mo, amortizing to $825/mo.
Tab 3 — HELOC vs Alternatives
| HELOC | Cash-Out Refi | Personal Loan | |
|---|---|---|---|
| Monthly payment | $547 (draw) | $3,028 (new mtg) | $1,304 |
| Net monthly increase | +$547 | +$798 | +$1,304 |
| Rate | 8.75% variable | 7.00% fixed | 11.50% fixed |
| Tax deductible | Yes | Yes | No |
| Closing costs | ~$0 | ~$13,650 | $0 |
Verdict: HELOC wins — preserves their low 5.8% mortgage rate, tax-deductible for renovation, $0 closing costs, and flexible draws as the kitchen project progresses. Cash-out refi would replace their 5.8% mortgage with 7.0%, costing an extra $798/mo.
HELOC vs Home Equity Loan vs Cash-Out Refinance
| Feature | HELOC | Home Equity Loan | Cash-Out Refi |
|---|---|---|---|
| Rate type | Variable (fixed lock avail.) | Fixed | Fixed |
| Avg rate (Mar 2026) | 7.18% | 7.75%–7.92% | ~7.00%–7.25% |
| Disbursement | Revolving draws | Lump sum | Lump sum (replaces mortgage) |
| Closing costs | Low (often $0) | 2%–5% | 2%–6% of full loan |
| Payments | Interest-only possible | Fixed P&I | Fixed P&I |
| Best for | Ongoing/phased expenses | Known one-time expense | Large sum + high existing rate |
Frequently Asked Questions
The national average HELOC rate is 7.18% as of March 2026 (Bankrate). This is down from ~8.5% in mid-2024 after five Fed rate cuts. HELOC rates are variable, tied to the Prime rate (currently 6.75%). Excellent credit borrowers may see rates as low as 6.25%, while fair credit borrowers pay 8.00%–9.50%.
Most lenders allow borrowing up to 80% of your home's value minus your mortgage balance (Combined Loan-to-Value or CLTV). For a $400,000 home with $250,000 mortgage: $400K × 80% − $250K = $70,000. Some lenders go to 85% or even 90% CLTV, and credit unions may allow up to 95%.
Only if the funds are used to buy, build, or substantially improve the home securing the loan. A kitchen remodel or roof replacement qualifies. Debt consolidation, education costs, or vacations do not. This rule was made permanent by OBBBA (previously a temporary TCJA provision). Combined mortgage + HELOC debt limit for deductibility: $750,000 ($375K MFS). See IRS Publication 936.
When the draw period (typically 10 years) ends, you enter the repayment period (typically 20 years). You can no longer borrow, and your payments switch from interest-only to fully amortizing principal + interest. This payment shock can increase your payment by 20%–50% or more, depending on your balance and rate. Plan for this transition well in advance.
It depends on your existing mortgage rate. If your current rate is below today's rates (e.g., you locked 3–5% in 2020–2022), a HELOC is almost always better — you preserve your low rate and only pay interest on the amount you borrow. If your rate is above today's rates, a cash-out refi lets you lower your rate on the entire balance while accessing equity. Cash-out refi has higher closing costs (2–6% of full loan) and resets your amortization clock.
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