Lower and The TW Team
HELOC & Home Equity Loan Calculator
Home equity

A line, or a loan?

A home equity line and a home equity loan are not two versions of the same thing. They sit under different halves of Regulation Z, and one of them can be frozen, repriced, and handed to you at the end of the draw period with a payment that has doubled. This works out both, and shows the number the line’s paperwork buries: what you pay once the interest-only years are over.

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An estimate from your figures, not advice, and not an offer of credit.

Your Scenario

Which one

Zero if the home is paid off.

The full commitment. On a line, the whole amount counts against your equity whether you draw it or not.

Your rate is prime plus a margin, and it moves when prime moves. Both are example figures, not our pricing, replace them with what you have been quoted.

Every dwelling-secured line must state one (12 CFR 1026.30). Periodic caps are not required and most lines have none, so the rate can travel there faster than you would expect.

Payment during the draw
Costs, purpose and occupancy

Many lines have none up front, but carry an annual fee and an early closure fee. Ask about both.

This decides whether the interest is deductible, it turns on the use of the money, not on what the loan is called.

Decides whether you get a three-day right to cancel.

When The Draw Period Ends

The step up
,

During the draw ,
Once it ends ,
Difference ,
At the lifetime cap ,

Your Equity

What the second lien uses up, and what is left behind it.

Value,
First mortgage,
This line or loan,
Equity left,
Combined loan-to-value,

The Same Money, Both Ways

Identical amount, identical equity position, two entirely different deals.

Line of creditHome equity loan

Two Rules Worth Knowing Before You Sign

Right to cancel

Whether the interest is deductible

Reference

What each one actually is

Written from Regulation Z and the tax code rather than from a brochure. The differences that matter are regulatory, not cosmetic.

Two different halves of the rulebook

A line of credit is open-end credit, governed by 12 CFR 1026.40. A home equity loan is closed-end, governed by 1026.17 to 1026.23 and by TRID.

That is not a technicality. On a line you get your disclosures at application, along with the CFPB’s booklet. TRID does not apply at all, 1026.19(e)(1)(i) and (f)(1)(i) reach only a closed-end consumer credit transaction secured by real property, so there is no Loan Estimate, no Closing Disclosure, and no three-business-day waiting period before closing.

On a loan you get a Loan Estimate within three business days of applying, a Closing Disclosure at least three business days before you sign, and a fresh three-day wait if the APR moves, the product changes, or a prepayment penalty appears.

Nobody has to check you can afford a line

The ability-to-repay rule at 12 CFR 1026.43, the one written after 2008 to stop people being given loans they could not repay, expressly excludes “a home equity line of credit subject to § 1026.40” (1026.43(a)(1)).

So on a line, no federal rule requires anyone to verify you can afford the payment you will face when the draw period ends. On a home equity loan, the full ability-to-repay analysis applies.

That asymmetry is the single strongest argument for doing the arithmetic on this page yourself before you sign anything.

The end of the draw

A line has two lives. During the draw period you can borrow, repay and borrow again, and the payment is usually interest only. During the repayment period you cannot draw, and the balance has to be repaid.

The payment jump has nothing to do with rates. It is principal entering a payment that never contained any. On $100,000 at 8.5%, with the rate not moving at all: $708 a month interest-only, $868 over a twenty-year repayment, $1,240 over a ten-year one, a 75% increase in the last case.

And some plans do not amortise at all. The CFPB’s own booklet warns that a lender may require “the entire balance owed, all at once” at the end of the draw. Ask which yours is, in writing.

How bad the shock gets

This is measurable, and it has been measured. Federal Reserve researchers found that 4.5% of lines reaching the end of their draw period went delinquent within six months, against 0.3% of lines that had not reached it.

Among higher-risk borrowers, credit score under 725, combined loan-to-value over 80%, reaching end of draw raised the probability of default by 8.8 percentage points, rising to 16.1 points where a balloon payment was involved. Roughly 30% of that group saw their required payment more than double.

The banking agencies issued dedicated end-of-draw guidance in July 2014 precisely because of this. It is a known, quantified, entirely predictable event, and it is in your paperwork from day one.

The rate, and what caps it

A line’s rate is an index plus a margin. The index must be outside the lender’s control and publicly available (1026.40(f)(1)); in practice it is the Wall Street Journal prime rate. Your margin is fixed; prime is not.

A lifetime maximum rate is required by 12 CFR 1026.30 on any dwelling-secured consumer credit whose rate can rise. What is not required is a periodic cap, and most lines have none, so unlike an adjustable first mortgage, there may be nothing limiting how fast your rate travels toward the ceiling.

At application you must be given the payment on a $10,000 balance at that maximum rate, and the earliest date it could apply (1026.40(d)(12)(x)). Read that line. It is the worst case, and it is disclosed.

The lender can freeze your line

This is what blindsides people. Under 1026.40(f)(3)(vi) a lender may stop further advances or reduce your limit if: the home’s value declines significantly; it reasonably believes you cannot meet the payments because of a material change in your finances; you are in default of a material obligation; or its regulator tells it that continued advances are unsafe.

On “significantly”, the staff commentary gives a safe harbour: a decline counts once the initial difference between your credit limit and your available equity has been cut in half. A lender does not need a full appraisal to conclude that, an automated valuation will do.

You must be notified within three business days of the action, with the specific reason (1026.9(c)(1)(iii)). Terminating and accelerating a line is much harder for a lender than freezing one, 1026.40(f)(2) limits that to fraud, failure to pay, and acts that impair the security.

Getting a frozen line back

Rarely mentioned, and worth money. If your agreement requires you to request reinstatement, the burden is entirely on you, the lender will not do it unprompted. If it does not, the lender must monitor the account and reinstate as soon as reasonably possible once the condition has passed.

The practical advice: find out which kind you have, and if your line is frozen, ask in writing, keep the copy, and ask again. A frozen line that nobody asks about stays frozen.

Three days to change your mind, sometimes

A lien on your principal dwelling that is not purchase money is rescindable for three business days: a line under 1026.15, a loan under 1026.23. The clock runs from the last of opening the plan, receiving the notice, and receiving all material disclosures. You get two copies of the notice.

On a line, the right attaches when the plan is opened, when the security interest is increased, and when the limit is raised, not to each draw within a limit you already have.

There is no right of rescission on a second home or an investment property, because both sections require your principal dwelling. And if the notice or the material disclosures never arrive, the three days become three years.

The interest is usually not deductible

Since 2018, interest on a home equity loan or line is deductible only to the extent the money buys, builds or substantially improves the home that secures it (IRC 163(h)(3); IRS Publication 936).

Draw on a line to renovate the house and the interest may be deductible, inside the $750,000 total acquisition debt limit. Draw on the same line to consolidate credit cards, buy a car or fund a business and it is not, the label on the loan is irrelevant, the use of the money is everything. Mixed uses must be split, so keep the invoices.

This was made permanent by legislation enacted in July 2025. Do not plan around the old $100,000 home equity allowance returning; it is not scheduled to.

Why there is no APR comparison here

Because the two numbers do not mean the same thing, and putting them side by side would be misleading rather than helpful.

An open-end APR is just the periodic rate annualised, 1026.14(b), and it contains no fees at all. Regulation Z requires the lender to say so out loud: 1026.40(d)(6) makes them disclose “that the rate does not include costs other than interest”.

A closed-end APR includes points, origination fees and other prepaid finance charges. So a line quoted at 8.5% APR and a loan quoted at 8.5% APR are not the same price, and the line is not necessarily the cheaper one.

The honest comparison is total cost over the period you will actually carry the balance, which is what the comparison table on this page does instead.

What the lender must tell you at application

For a line, 1026.40(d) requires a specific list before you commit: what the lender can do to your account (d)(4); a payment example based on a $10,000 balance showing the minimum payment, any balloon, and how long repayment takes (d)(5); an itemisation of the lender’s own fees (d)(7); a good-faith estimate of third-party fees (d)(8); whether negative amortisation is possible (d)(9); minimum draw and balance requirements (d)(10); and a statement to consult a tax adviser (d)(11).

Plus the historical example at (d)(12)(xi): what would have happened to the rate and payment on a $10,000 balance over the last fifteen years of the index. It is a backtest, not a forecast, but it is the most honest thing in the packet.

Which one to choose

A line makes sense when you do not know the timing or the amount, a renovation in stages, tuition by semester, a cushion behind a business. You pay interest only on what you have actually drawn, and you can repay and redraw.

A loan makes sense when you know the number today and want certainty. Fixed rate, fixed payment, a schedule you can read at closing, no freeze risk on money already in your account, and no cliff at the end of a draw period.

And a loan is the honest choice for anyone who would treat an open line as available spending. That is not a character judgement, it is what the product is designed to encourage.

About consolidating debt with this

Three things a payment comparison hides, all of which should be said plainly.

You are converting unsecured debt into debt secured by your house. Nobody forecloses over a credit card. They can over this.

The interest is not deductible, because paying off cards does not buy, build or improve the home.

Stretching a five-year balance over twenty years can cost more in total even at a much lower rate. And the cards you just paid off now have room on them again, the common outcome is a household carrying the line and new card balances. If you do it, pair it with a fixed payoff schedule and close or freeze the accounts.

Questions

What people actually ask

What is the difference between a HELOC and a home equity loan?

A line of credit is revolving: you draw what you need, pay interest only on what you have drawn, and can borrow again. The rate is variable and the lender can freeze it. A home equity loan is a lump sum at a fixed rate with a fixed payment that amortises from the first month. They are governed by different parts of Regulation Z and the protections you get differ.

What happens when my HELOC draw period ends?

You can no longer borrow, and the balance has to be repaid, usually amortised over ten to twenty years, occasionally demanded in one balloon payment. If you were paying interest only, your payment jumps because principal is now included. On $100,000 at 8.5% the payment goes from about $708 to about $868 over twenty years, or $1,240 over ten, without the rate changing at all.

Can my lender freeze my HELOC?

Yes. Under 12 CFR 1026.40(f)(3)(vi) a lender may suspend advances or cut your limit if your home’s value falls significantly, if your financial circumstances change materially, if you default on a material obligation, or if its regulator objects. It must tell you within three business days and give the specific reason. Getting the line reinstated is often on you to request.

Is HELOC interest tax deductible?

Only to the extent you use the money to buy, build or substantially improve the home that secures the loan. Renovating the house, potentially yes. Consolidating credit cards, buying a car, paying tuition, no. This turns on what you spend the money on, not on what the loan is called, and it was made permanent in July 2025.

How high can my HELOC rate go?

Up to the lifetime maximum in your agreement, which every dwelling-secured line must state. There is no federal requirement for a periodic cap, so many lines have nothing limiting how fast the rate gets there. Your disclosures include the payment on a $10,000 balance at that maximum rate, that is the worst case, and it is written down.

Do I get three days to cancel a home equity loan?

On your primary home, yes, three business days from the last of closing, receiving the notice, and receiving all material disclosures. On a second home or an investment property, no: the right of rescission requires a lien on your principal dwelling. If the notice or disclosures were never delivered, the right can run for three years.

Does an unused HELOC hurt me?

It uses up your equity whether you draw on it or not, because the lien secures the full commitment. It also appears on your credit report and counts in your combined loan-to-value if you apply for anything else. An untouched line is not free of consequences, and many carry an annual fee.

Should I use a HELOC to pay off credit cards?

It lowers the payment, and it converts unsecured debt into debt secured by your house. The interest will not be deductible, and stretching a five-year balance over twenty years can cost more in total even at a lower rate. If you do it, close or freeze the cards and set a fixed payoff schedule, because the most common outcome is carrying both.

Is a HELOC APR comparable to a mortgage APR?

No, and this catches almost everyone. An open-end APR is the periodic rate annualised and contains no fees whatsoever, the lender is required to tell you so. A closed-end APR includes points and origination fees. A line and a loan quoted at the same APR are not the same price. Compare total cost over the period you will carry the balance instead.

How much can I borrow against my home?

Lenders work from combined loan-to-value: your first mortgage plus the full new line or loan, divided by the value. The limit varies by lender, credit and occupancy, and this page does not publish one because it is not ours to publish. What it does show is where your combined loan-to-value lands, which is the number the decision turns on.

Can I convert part of my HELOC to a fixed rate?

Many plans allow it, carving a fixed-rate sub-loan out of the line. Regulation Z requires the terms to be disclosed at application: when you may convert, how long you get to repay, any fee, and the rate or the index and margin that will apply. It is worth asking about before you need it, because the terms are set when you open the plan.

Which is cheaper?

It depends on how much you draw and for how long. A line is cheaper if you draw a little and repay quickly, because you pay interest only on what you use. A loan is usually cheaper if you are going to carry the full balance for years, because the rate is fixed and cannot be repriced upward. Compare total interest over the period you will actually hold the money, not the headline rate.

Important disclosures

Taylor Weiner, mortgage loan originator, NMLS #263090  ·  Lower, LLC, NMLS #1124061  ·  5950 Symphony Woods Road, Suite 312, Columbia, MD 21044  ·  (714) 658-4912  ·  tweiner@twteam.com  ·  Verify licensing at nmlsconsumeraccess.org. Licensed to originate residential mortgage loans in California.

Not a government agency. The TW Team at Lower is not affiliated with, acting on behalf of, or endorsed by HUD, the FHA, the VA, the USDA, the FHFA, Fannie Mae, Freddie Mac or any other government agency. This page is not a government publication and has not been reviewed or approved by HUD, by the FHA, by the VA, by the USDA or by any other government agency. FHA loans are insured by the Federal Housing Administration and VA loans are guaranteed by the Department of Veterans Affairs; both are originated by approved lenders, not by the agencies themselves.

This calculator is an educational estimate based on figures you enter. It is not a rate quote, an offer of credit, or a commitment to lend. No rate on this page is offered or available; every rate field opens on an example figure you are expected to replace, and nothing on the page adjusts one. This page publishes no lender’s qualifying guidelines, no maximum combined loan-to-value, no minimum credit score, no product parameters. Those are set by the lender and by underwriting.

A line of credit carries a variable rate that can rise to the lifetime maximum in your agreement, and a lender may suspend advances or reduce your limit in the circumstances set out in 12 CFR 1026.40(f). Your agreement and account-opening disclosures govern.

Where the rules on this page come from

Open-end home equity plans: 12 CFR 1026.40, including (d) application disclosures, (d)(12)(x) the payment at the maximum rate, (d)(12)(xi) the fifteen-year historical example, (f)(2) termination, (f)(3)(vi) suspension and limit reduction; 1026.9(c)(1)(iii) change notices; 1026.14(b) the open-end annual percentage rate; 1026.30 the required lifetime maximum rate.

Closed-end second liens: 12 CFR 1026.17 to 1026.23; 1026.19(e) and (f) for the Loan Estimate and Closing Disclosure; 1026.19(e)(1)(i) and (f)(1)(i), whose Loan Estimate and Closing Disclosure requirements reach only closed-end credit and so exclude home equity lines from those requirements.

Ability to repay: 12 CFR 1026.43, and 1026.43(a)(1), which excludes home equity lines of credit subject to 1026.40.

Rescission: 12 CFR 1026.15 for open-end plans, 1026.23 for closed-end credit; 1026.2(a)(24) for the residential mortgage transaction exclusion.

Deductibility: IRC §163(h)(3) and IRS Publication 936, as made permanent by P.L. 119-21 §70108, enacted 4 July 2025.

End-of-draw default statistics: Federal Reserve Finance and Economics Discussion Series 2015-073, and the July 2014 interagency guidance on home equity lines of credit nearing their end-of-draw periods.

Scope and limits of this calculator

This page models a level draw-period payment and a level repayment-period payment at a rate you enter. It does not model a rate that moves during the term, draws and repayments made at different times, minimum draw requirements, annual fees, early closure fees, a fixed-rate conversion option, or a plan that balloons at the end of the draw rather than amortising, though it warns that balloons exist and tells you to ask.

No annual percentage rate is shown for either product, deliberately. An open-end APR is the periodic rate annualised and contains no fees; a closed-end APR includes them. Showing both on one page under the same label would invite a comparison that is not valid. Your account-opening disclosures and your Loan Estimate carry the figures that govern.

Tax treatment is general information, not tax advice, and depends on facts this page does not know. Talk to your tax adviser.

Regulatory citations current as of September 2026.

⌂ Equal Housing Opportunity. Lower, LLC is an Equal Housing Lender. We do business in accordance with the Federal Fair Housing Act and the Equal Credit Opportunity Act.