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Step 1
Know where you stand on your loan. Being totally aware of your balance and the amount you are paying down is important to your financial health.
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Step 2
Pull out the stack of paperwork you signed when you closed your HELOC. The most important document in that pile of papers is the loan agreement. This piece of paper will break down all the significant terms of the loan to which you are bound. Look for the following numbers: loan amount, loan rate (both APR and contract rate) and loan term. Keep these numbers handy.
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Step 3
Find your most recent loan statement from the bank or lending institution. A HELOC is different from a standard mortgage in that it works like a credit card: There is generally a maximum loan amount, and advances can be taken from the line of credit until the maximum amount is reached. Also similar to a credit card, the payment required is based on the outstanding balance of the loan. So the lower the outstanding balance, the lower the payment. When figuring a long-term payment, make sure you've taken the majority of the advances off the credit line before figuring the payment. Write down the outstanding balance prior to calculation.
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Step 4
Access a reputable online financial calculator (see Resources). These provide a free mortgage calculator to consumers without any strings attached. Average the APR and the contract rate together. Plug in the outstanding balance, the rate and the term (the number of months allowed on the loan before full repayment is required). The site will give you a payment that reflects the principal and interest required to pay off the loan within the required term. If the payment doesn't match up to the payment reflected on your loan statement, call your lender to clear up the discrepancy.
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Step 5
Keep in mind is that your payment is based on your outstanding balance. If you take further cash advances off a HELOC, your payment will increase. If you feel that the revolving aspect of a HELOC is too cumbersome to manage, you may be better suited to a closed-end loan, in which the terms are more fixed.
