Broker DaveHELOC or home equity loan?
A HELOC quotes you a low payment because it isn't asking you to pay down any principal — yet. This works out how much you can borrow, what that payment becomes when the draw period ends, and what it becomes if the rate goes where your contract says it's allowed to.
Your house
What it would appraise for today — not what you paid.
Current LTV 63.3%. Enter 0 if the house is paid off.
Only used to compare against a cash-out refinance — but it's the number that usually decides it.
25 yrs
Lets you borrow up to $130,000 on top of your 1st.
Puts you at 80.0% CLTV.
How fast will it be gone?
5 yrs. This decides the whole thing — be honest, not optimistic.
The HELOC
The index your rate floats on. It moves when the Fed moves.
Your rate today: 8.5% (prime + margin).
The ceiling in your contract. Ask for it — it's the only number that bounds your risk.
10 yrs — 120 is standard.
20 yrs after the draw closes.
Often $0. Watch for an early-closure fee that claws them back if you close it within 3 years.
The home equity loan
Usually prices a bit above a HELOC's starting rate — you're buying certainty.
20 yrs
The third option
30 yrs
Higher than a second, because it's a full first-mortgage refinance.
$600,000 × 85% − $380,000 owed. Taking $100,000 leaves $30,000 still available.
What the HELOC actually costs you
$708.33/mo for the first 10 yrs — then it becomes $867.82/mo overnight. That's a 23% jump on a date already written in your contract.
Interest-only isn't a cheaper loan, it's a deferred one. Ten years of paying $708.33 leaves you owing the same $100,000 you started with — and then the whole thing has to be retired over 20 yrs.
And that assumes the rate never moves. At your 18% lifetime cap the payment after the draw is $1,543.31 — $834.98 more per month than you're paying today. That is what you are agreeing to, and it's the number nobody quotes.
HELOC vs. home equity loan
- After the draw ends$868/mo (+$159)
- If the rate hits your cap$1,543/mo
- Lifetime interest$193,278
- Paid + still owed at 5 yrs$142,875
- After the draw ends$884/mo — no change
- If rates go up$884/mo — still no change
- Lifetime interest$112,091
- Paid + still owed at 5 yrs$143,942
Over 5 yrs the HELOC costs $1,067 less. That's dollars paid plus what you'd still owe on the same date — so the HELOC gets no credit for simply deferring principal. It wins here because you're clearing it fast enough that the rate risk never has time to bite.
If the rate moves
| Scenario | Rate | Now | After draw | Lifetime interest |
|---|---|---|---|---|
| Today | 8.5% | $708 | $868 | $193,278 |
| +1 point | 9.5% | $792 | $932 | $218,711 |
| +2 points | 10.5% | $875 | $998 | $244,611 |
| +3 points | 11.5% | $958 | $1,066 | $270,943 |
| Lifetime cap | 18% | $1,500 | $1,543 | $450,395 |
| Fixed loan | 8.75% | $884 | $884 | $112,091 |
Every row is the same $100,000. The bottom row never moves no matter what the Fed does — that difference is exactly what the fixed rate is charging you for, and now you can see whether it's worth it.
Don't refinance your whole mortgage to get at this
- Keep your 3.75% 1st + take a 2nd
- $2,837.41/mo
- Blended rate across both
- 4.792%
- Cash-out refinance at 6.75%
- $3,113.27/mo
- Keeping your 1st saves
- $275.86/mo
This is the one people get wrong. A second at 8.75% looks worse than a refinance at 6.75% — until you notice the refinance reprices all $380,000 of your 3.75% money too. Your blended rate stays 4.792%, well under the 6.75% you'd be paying on everything. Over 5 yrs that's $55,713 you keep.
Email me this analysis
Same collateral, completely different promises
A HELOC is a credit line
Draw what you need, when you need it, and pay interest only on what's actually out. Repay it and you can draw again. That flexibility is real, and it's the best reason to choose one.
A home equity loan is a loan
One lump sum, one fixed rate, one payment that never changes for the whole term. Nothing to monitor and nothing that can move against you. You're buying certainty and paying a little for it.
How fast you repay decides it
Clearing it in a few years? The HELOC's low payment and flexibility win easily. Carrying it for a decade? The interest-only period quietly costs you the entire time, and the fixed loan usually wins.
What to check before you sign
- Ask for the lifetime cap in writing. A HELOC is priced at Prime plus a margin, which means the rate is whatever the Fed decides for the next twenty years. The cap is the only number that bounds your risk, and it's routinely left out of the sales conversation. If nobody will tell you what it is, that is your answer.
- Find out what happens at the end of the draw. Most lines re-amortize the whole balance over the repayment period — a step change on a known date. Some balloon instead and demand the entire balance at once. Those are very different products and they get sold with the same brochure.
- “No closing costs” usually has a clawback. Many HELOCs waive costs but recover them if you close the line within the first two or three years. That's fine if you know about it, expensive if you planned to sell.
- A lender can freeze or reduce a line. If values drop or your credit changes, the available credit can be cut — often exactly when you needed it. A home equity loan, once funded, is yours regardless.
- This is your house, not a credit card. Both are secured by the home. Consolidating unsecured debt into either one converts a debt that could be negotiated into one that can foreclose. Sometimes that's still the right trade — it should be a decision, not a default.
This calculator is educational and is not a loan offer, a rate quote, or a commitment to lend. Every figure is an estimate, and HELOC rates are variable. David Lurvey, NMLS 410420.
Thinking about a cash-out refinance instead?
If your first mortgage rate is higher than today's, refinancing the whole thing may genuinely beat a second. That's a break-even question, and it has an exact answer.
Refinance recoup calculatorWaiting for a better rate?
HELOC rates follow Prime, so they move when the Fed moves. Tell me the rate you're waiting for and I'll email you when it's real.
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