Home Equity Line of Credit (HELOC) Calculator

What is a HELOC?

A Home Equity Line of Credit, or HELOC, is a type of mortgage solution where homeowners obtain a revolving line of credit secured against the equity in their home. Typically, HELOCs are used to fund home improvement projects or consolidate high-interest-rate debt (think student loans, credit card debt, or medical debt).

What is the Difference Between a HELOC and a Home Equity Loan?

While both HELOCs and home equity loans are used to access the equity in your home, the two have some key differences. HELOCs are a line of credit that you can withdraw money from as needed for a certain period of time; a borrower need not draw the entire amount they are approved for and a borrower only is charged interest on the amount actually borrowed.  In contrast, a home equity loans are closed end loans that involve borrowing a one-time lump sum up front; you will then be charged interest on the full loan amount immediately.

What is the Difference Between a HELOC and a Cash-Out Refinance?

A cash-out refinance is a loan that replaces your existing mortgage loan while increasing the principal balance for the equity you are taking out from your home.  With a cash-out refinance, the difference between what you owe on your existing mortgage and your new loan is the amount that you cash out which may result in an increase to your existing interest rate for your current loan balance. A HELOC, in contrast, T does not change the interest rate on your existing mortgage loan.  Generally, cash-out refinances are a good option when interest rates are falling because you’ll get a more favorable interest rate while also gaining access to the cash out funds.

How Does the HELOC Calculator Work?

Simply put in the appraised value of your home, the outstanding amount of your existing home loan, and your loan to value ratio limit. Hit “Calculate” and you’ll see the HELOC amount that you could qualify for. You can also click “View Report” to see a more detailed outline of what HELOC amount you could qualify for if the appraised value of your home or loan to value ratio changes.

What Can I Use a HELOC For?

As mentioned above, the most common uses for HELOCs are to pay for home improvement projects or consolidate high-interest rate debt. Other uses include serving as an emergency fund for unexpected cash needs, for making personal purchases or investments, or for planning ahead for or living in retirement.

What Do I Have to Pay on a HELOC?

During the initial period of your HELOC, called your “draw” period, you can borrow against your line up to your maximum approved limit.  During this time, which lasts ten years for HELOCs at Leader Bank, you will be required to pay at least the interest that has accrued each month on your outstanding line balance.  You may also choose to make payments towards your outstanding principal, which would reduce the outstanding amount borrowed – much like the payments on credit card debt.  Once your draw period has ended, you will no longer be able to draw on your HELOC and your final loan amount will be fixed; you will then have a set time (fifteen years for Leader Bank HELOCs) to make minimum monthly payments, comprising of your monthly interest and amortizing amounts of outstanding principal, until the line is paid off in full. 

How Can I Learn More About HELOCs?

To learn more about the specific products and terms for Leader Bank HELOCs that may be available to you, please contact a Leader Bank loan originator for more information!