HELOC vs Home Equity Loan Calculator

Tapping home equity comes down to a choice between two instruments, and which one fits depends on the numbers behind your situation. A Home Equity Line of Credit (HELOC) and a traditional home equity loan carry different cost structures, so the wrong pick can cost thousands in extra interest over the life of the debt.

Here the comparison runs on total interest cost. On one side is the HELOC's variable rate, generally the prime rate plus a margin; on the other is the home equity loan's fixed rate. The calculator assumes you borrow the full amount on day one under both options. The home equity loan is repaid in equal monthly payments over the repayment period; the HELOC is interest-only for the draw period and then repaid over the same repayment period, with the HELOC rate you enter held constant. It adds up the interest on each and labels the cheaper one as the better value. Closing costs and future rate changes are not included, so add them yourself when you compare offers.

Worth weighing carefully: a HELOC's rate can swing hard during the draw period, which makes budgeting tougher than it is with a fixed home equity loan. Borrowers also routinely overestimate how much of their credit line they'll draw, and reaching for a HELOC to cover a single one-time expense often ends up pricier than a straight loan would have been. Judge either option against the full 20-30 year term rather than the comfort of the opening payments.