What Is an Interest-Only HELOC Payment?
During the draw period (typically the first 10 years of a HELOC), some lenders allow you to pay only the interest that accrues each month on your outstanding balance. Under an interest-only arrangement, principal payments are not required during this phase, which is why draw period payments are significantly lower than what you'll pay once the repayment period begins.
The Formula Is Simple
Interest-only payment = Balance × (Annual Rate ÷ 12). On a $40,000 balance at 8.5%, that's $40,000 × (0.085 ÷ 12) = approximately $283 per month. The catch is that when the draw period ends, you'll still owe the full $40,000 — and your payment will jump to cover both principal and interest over the remaining repayment term.
Interest-only payments feel affordable, but you're not reducing your debt at all. Every dollar you pay during the draw period goes entirely to the lender as interest. Use the HELOC Payoff Calculator to see what happens if you pay above the minimum.
How Variable Rates Affect Your Payment
Because HELOC rates are variable, your interest-only payment can change month to month as the prime rate moves. A 1% rate increase on a $50,000 balance adds approximately $42 per month to your payment. Try the HELOC Payment Calculator to model both your draw period and repayment period costs together.