This paper describes real-time volumetric haptic and visual algorithms developed to simulate burrhole creation for a Virtual Reality-based craniotomy surgical simulator. A modified Voxmap point-shell algorithm [4, 7] is created to simulate haptic interactions between bone cutting tools and voxel-based bone. New surface boundary detection and force feedback calculation methods help reduce "force discontinuities" of the original Voxmap point-shell algorithm. To maintain stable haptic update rates, new forces are calculated outside the haptics rendering loop. A multi-rate haptic solution [2] is used to introduce calculated forces into the haptics loop and to interpolate forces between updates. A bone erosion method is also created to simulate bone drilling capabilities of different tools. 3D texture-based volume rendering is used to display the bone and to visually remove bone material due to drilling in real-time. Volumetric shading is computed by the GPU of the video card. The algorithms described make it possible to simulate several tools typically used for a craniotomy. Realistic 3D models are also created from real surgical tools and controlled by the haptic device.