1. What is HELOC Interest Only Payment?

A HELOC (Home Equity Line of Credit) interest-only payment is the minimum monthly payment required during the draw period, covering only the interest accrued on the outstanding balance without reducing the principal amount.

2. How Does the Calculator Work?

The calculator uses the interest-only payment formula:

Where:

• \( P \) — Principal balance (currency units)
• \( R \) — Annual interest rate (%)

Explanation: The formula calculates the monthly interest payment by converting the annual rate to a monthly rate and applying it to the principal balance.

3. Importance of HELOC Payment Calculation

Details: Understanding your interest-only payment helps with budgeting during the draw period and planning for the repayment phase when principal payments begin.

4. Using the Calculator

Tips: Enter your current HELOC balance and annual interest rate. The calculator will show your monthly interest-only payment amount.

5. Frequently Asked Questions (FAQ)

Q1: What is a HELOC draw period?
A: The draw period is the initial phase (typically 5-10 years) when you can borrow against your credit line and make interest-only payments.

Q2: What happens after the draw period ends?
A: After the draw period, you enter the repayment phase where you must pay both principal and interest, resulting in higher monthly payments.

Q3: Are interest-only payments tax deductible?
A: In many cases, yes. HELOC interest may be tax deductible if used for home improvements, but tax laws vary by jurisdiction. Consult a tax professional.

Q4: Can I make principal payments during the interest-only period?
A: Yes, most HELOCs allow you to make additional principal payments during the draw period to reduce your overall interest costs.

Q5: How does variable interest rate affect my payments?
A: Since HELOCs typically have variable rates, your monthly payment will fluctuate as interest rates change throughout the draw period.