Need help figuring HELOC payments (using it to pay cash for a house)

[Anna Watkins]

Last week I started an application for a HELOC on my primary residence in metro Atlanta, figuring I was going to have to have cash to compete for the better deals in my investing area. The next day I found out a seller had accepted an offer I had already given up for lost! I could get conventional financing for the new house, but since I didn't want to mess up the HELOC app, I'm just going to pay for the house with cash from the equity line and worry about refinancing once the dust settles.

How do equity lines figure the interest payments? Is there a calculator somewhere (or does anybody have a spreadsheet with formulas written?) where I can put in the house price, the HELOC terms (3.99% at present, 10 year draw w/ simple interest, 15 years after that to pay with amortization, what else?), and the minimum interest payment will be spit out the other end? With the variable simple + amortized interest, and interest-only then P&I, my non-calculating head is spinning.

Closing costs on the equity line are negligible, and the interest rate is better than what I'll get in a refi, but I can't figure out whether it's wiser to let the loan ride a bit on the equity line (at 3.99%) or try to refinance right away (with $2-$3k closing and 5.5% interest.)

Am I even making sense?

[Jon Holdman]

HELOCs are typically interest only during the draw period, unless you do a lock.  So, 3.99%/12 times the outstanding balance is your payment each month.  When you lock or at the end of your draw period, the outstanding balance is converted to a fully amortized loan with the selected term.  Lock rates and the amortized rate after the draw period are typically higher than the IO rate.

So, say you took out $100K on day 1.  Your payment would be $332.50 a month.  Then, when it converts to 15 year amortization at 7% (a wild guess, though I think this is the ballpark of what you'd get right now on a lock) your payment would become $898.83.

Terms vary, so ready the documents carefully and ask questions.