If you are looking at utilizing your Home Equity Line of Credit (HELOC) or are looking into opening a HELOC, you may be wondering how to calculate your payments. Before we dive deeper into how to calculate them, let’s look at what a HELOC is. A Home Equity Line of Credit (HELOC) is a revolving line of credit that allows homeowners to borrow against the equity in their home. It works similarly to a credit card, giving you access to funds as needed, up to a set limit, with flexible repayment options. HELOCs typically have lower interest rates than personal loans or credit cards and can be used for home improvements, debt consolidation, or other significant expenses.
How to calculate your loan payment
Here at Arbor, your payment amount will be 1% of your last advance balance. For example, if you draw $10,000, your payment will be 1% of that amount. In our example, that will be a monthly payment of $100. Note that to help you pay off your loan faster and for added peace of mind, we do have a $50 minimum payment.
Your payment will remain $100 until you redraw on your HELOC. Let’s continue our example to help explain this. Let’s say you redraw and now your balance is $15,000. Your new payment would become 1% of that amount and change to $150 per month.
At the end of your 10-year draw period (the period of time you can make advances on your HELOC) the loan amount will transition into a fixed loan with the amount you owe. To calculate this payment, you can use our Home Equity Calculator to estimate your payment. Keep in mind that your interest rate can change during the draw period, and it will become a fixed rate of what rate is offered at the time.
Have questions? We are here to help! Contact one of our Mortgage Loan Originators today with any questions you may have.
