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Home Equity Line Of Credit Payment Formula:
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A Home Equity Line of Credit (HELOC) is a revolving line of credit that allows homeowners to borrow against the equity in their home. It functions similarly to a credit card but uses your home as collateral, typically offering lower interest rates than unsecured loans.
The calculator uses the standard amortization formula:
Where:
Explanation: This formula calculates the fixed monthly payment required to fully amortize a loan over its term, including both principal and interest components.
Details: The PMT formula distributes payments evenly over the loan term, with early payments consisting mostly of interest and later payments consisting mostly of principal. This ensures the loan is paid off completely by the end of the term.
Tips: Enter the loan amount in dollars, annual interest rate as a percentage (e.g., 5.25 for 5.25%), and loan term in years. The calculator will provide monthly payment, total repayment amount, and total interest paid.
Q1: What is the difference between HELOC and home equity loan?
A: HELOC is a revolving line of credit with variable rates, while a home equity loan provides a lump sum with fixed rates and payments.
Q2: How does RBC's HELOC work?
A: RBC HELOC allows you to borrow up to a certain limit, make interest-only payments during the draw period, and then enter amortization phase.
Q3: What are typical HELOC interest rates?
A: HELOC rates are typically prime rate plus a margin, ranging from prime + 0.5% to prime + 2.5% depending on creditworthiness.
Q4: Are there tax benefits to HELOC?
A: Interest on HELOC may be tax-deductible if used for home improvements, but consult a tax professional for specific advice.
Q5: What is the maximum HELOC amount?
A: Typically up to 65-80% of your home's appraised value minus your mortgage balance, depending on lender policies.