HELOC Calculator

How a HELOC actually works

A Home Equity Line of Credit is a revolving credit facility secured by your home. The lender approves a maximum line size based on combined loan-to-value (CLTV) — the sum of your first mortgage and the HELOC ceiling divided by the appraised home value. You draw what you need, when you need it, and pay interest only on the outstanding balance during the draw period.

Max line = home value × CLTV cap − first mortgage balance
Monthly interest-only payment = outstanding balance × annual rate ÷ 12
Repayment P&I = standard amortization of the balance at the start of the repayment period

HELOC vs cash-out refinance: which fits when

The two products both tap home equity but they have very different cost structures:

• HELOC: revolving line with variable rate (typically prime + 0.5–2%), interest-only during the draw period, low or zero closing costs. Best for short-term capital needs you'll pay back quickly, or when you want optionality on draws rather than a single lump-sum.
• Cash-out refinance: single lump sum, fixed rate, 30-year amortization, 2–3% closing costs and a permanent payment increase. Best for large extractions you'll deploy long-term — like a next investment property or a major rehab.

Rule of thumb: under ~$50K of capital need with a short (under 3-year) hold → HELOC. Above $50K with a long deployment horizon → cash-out refi. See the side-by-side analysis in our HELOC investment strategy guide.

The break-even ROI and why it matters

If you draw on a HELOC at 9.5% to fund an investment, the investment has to produce more than 9.5% annual return just to break even on the debt service. Below that threshold you're losing money in real terms. The calculator surfaces the exact break-even ROI so you can sanity-check your reinvestment thesis before drawing.

In practice, HELOC arbitrage works when:

• BRRRR refinance scenarios. You use the HELOC to fund purchase + rehab, refinance the property into a long-term mortgage, and pay the HELOC off quickly — the high HELOC rate is only carried for 4–9 months.
• High cash-on-cash deals. Investment properties with 15%+ cash-on-cash easily clear a 9.5% break-even. Verify the cash-on-cash with our cash-on-cash return calculator.
• Home improvements that materially raise rent or value. A $40K kitchen renovation that adds $400/mo rent ($4,800/yr) is a 12% cash return — clears a 9.5% HELOC with room.
• Down payment funding for next property. Use the HELOC for the down payment on a property that itself produces 15%+ leveraged returns. The blended cost of capital still favors the deal.

Tax treatment after TCJA

The 2017 Tax Cuts and Jobs Act materially changed HELOC interest deductibility. As of 2026:

• Personal-use HELOC interest: deductible only if the proceeds are used to buy, build, or substantially improve the home that secures the loan. Using a HELOC for a vacation or to pay credit cards = no deduction.
• Investment-property purchase via HELOC: the interest is potentially deductible against the rental income of the property the proceeds funded, not against personal income. Tracing rules apply — document the flow of funds clearly.
• Home improvement that meets the IRS "substantial improvement" standard: interest deductible against personal income up to the post-TCJA mortgage interest cap.

The calculator shows the potential annual tax shield as a ceiling — actual capture depends on your specific use of funds and itemization status. Consult a tax professional before relying on the deduction.

Worked example: $75K draw on a $450K home

The defaults model a common 2026 BRRRR-funding scenario: $450K home with $195K first mortgage, drawing $75K from a HELOC at 9.5% on a 10-year interest-only draw period followed by 20-year amortized repayment. Investing the proceeds at 15% expected return:

• Max line at 85% CLTV: $450K × 0.85 − $195K = $187,500.
• Drawing $75K leaves $112,500 of headroom for future deals.
• Monthly interest-only payment: $593.75 ($75K × 9.5% ÷ 12).
• Monthly P&I starting year 11: $698.55 (20-year amortization at 9.5%).
• Break-even ROI: 9.5% — exactly the HELOC rate.
• Year-1 net at 15% reinvest ROI: $11,250 − $7,125 − $1,000 = +$3,125.
• Lifetime interest if held the full 30 years and never paid down: roughly $137K — much more than the original draw.

The lifetime-interest number is the most important sanity check. HELOCs work when you pay them down fast — typically within 3–5 years. Carrying a balance for 30 years at 9.5% destroys the math even if year-1 looks fine.

HELOC mistakes investors make

• Treating the variable rate as fixed. Prime moves with the Fed funds rate. A 9.5% HELOC can be a 12% HELOC in 18 months. Always stress-test at +2% rate.
• Drawing without a deployment plan. Cash sitting idle at 9.5% interest is a guaranteed loss. Have the next deal lined up before drawing.
• Ignoring the repayment-period cliff. Year 11 the payment jumps from interest-only to fully-amortized. On a $75K balance the monthly goes from $594 to $699 — modest, but if rates have risen the jump can be material.
• Maxing the line. Drawing 90% of the available line eliminates your buffer for emergency capital. Keep at least $25K of headroom for unplanned needs.
• Assuming the tax deduction will work. Post-TCJA rules are restrictive. Don't bake the tax shield into your underwriting unless you have specific documentation tying proceeds to qualifying use.

Frequently asked questions

What is the maximum HELOC I can get on my home?

Most lenders cap combined loan-to-value (CLTV) at 80–85% on a primary residence and 70–75% on an investment property. Max line = home value × CLTV cap − existing first mortgage balance. A $450K home with a $195K mortgage at 85% CLTV gives a $187,500 line.

What is the difference between the draw period and the repayment period?

During the draw period (typically 10 years), you can borrow and repay freely; minimum payments are interest-only on the outstanding balance. When the draw period ends, the repayment period begins (typically 20 years) — no more new draws, payments amortize the outstanding balance fully over the remaining term.

Are HELOC rates fixed or variable?

Almost always variable, indexed to the prime rate plus a margin (typically 0.5–2%). When the Fed raises rates, your HELOC rate rises. A small number of lenders offer a fixed-rate-conversion option on a portion of the balance — useful when you have a chunk you know you'll carry long-term.

Can I get a HELOC on an investment property?

Yes, but harder. Investment-property HELOCs typically cap at 70–75% CLTV (vs 80–85% on a primary residence), carry rates 1–2% higher, and not all lenders offer them. Some investors find better terms on a cash-out refinance or DSCR loan instead.

Is HELOC interest tax-deductible?

Post-TCJA, only if the proceeds are used to buy, build, or substantially improve the home that secures the loan, OR if traced to investment use against the income of the investment. Using a HELOC to pay credit cards or fund a vacation = no deduction. Consult a tax professional before relying on the deduction.

What credit score do I need for a HELOC in 2026?

Most lenders require 680+ FICO for the standard product and 720+ for the best rates. Below 680, expect higher margins (prime + 2–3%) and tighter CLTV caps (70–75%). Below 620 is generally not approvable for a standard HELOC.

Sources

• Truth in Lending Act (TILA) Regulation Z — HELOC disclosure requirements
• IRS Publication 936 (Home Mortgage Interest Deduction) — post-TCJA deductibility rules
• Federal Reserve H.15 (Selected Interest Rates) — prime rate index
• Consumer Financial Protection Bureau (CFPB) HELOC consumer guide
• Mortgage Bankers Association — HELOC origination volume + rate environment 2026

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