1. What is HELOC vs Home Equity Loan?

A HELOC (Home Equity Line of Credit) is a revolving credit line with variable rates, while a home equity loan provides a lump sum with fixed rates. This calculator compares their monthly payments.

2. How Does the Calculator Work?

The calculator uses these formulas:

Where:

• \( P \) — Principal amount (USD)
• \( r \) — Monthly interest rate (annual rate ÷ 12)
• \( n \) — Number of months (years × 12)
• \( PMT_{HELOC} \) — HELOC monthly payment
• \( PMT_{HE} \) — Home equity loan monthly payment

3. Key Differences

HELOC: Variable rates (typically 7-9%), interest-only payments possible, draw period followed by repayment.
Home Equity Loan: Fixed rates, fixed payments, entire amount disbursed upfront.

4. Using the Calculator

Tips: Enter loan amount, interest rate (%), term in years, and select HELOC payment type. Rates typically range 7-9% for both products.

5. Frequently Asked Questions (FAQ)

Q1: Which is better for home renovations?
A: HELOC for ongoing projects (draw as needed), home equity loan for one-time costs with predictable budget.

Q2: Are rates different between these products?
A: HELOCs usually have slightly higher rates due to their flexibility, but both are based on prime rate + margin.

Q3: What are typical term lengths?
A: HELOCs: 10-year draw + 20-year repayment. Home equity loans: 5-30 year terms.

Q4: Are there tax benefits?
A: Both may qualify for mortgage interest deduction if used for home improvements (consult a tax advisor).

Q5: Which has lower closing costs?
A: HELOCs often have lower upfront costs than home equity loans.