HELOC: Home Equity Line of Credit

Is a HELOC right for you?

A home equity line of credit is a revolving credit line secured by your home, a lot like a credit card with a much lower rate. You keep your current first mortgage (and its rate) and borrow against the equity on top of it.

Who it's best for

• Homeowners with a low first-mortgage rate who want cash without giving that rate up in a cash-out refinance.
• Renovations and repairs where costs come in stages and you only want to pay interest on what you've used.
• Debt consolidation replacing higher-rate credit cards or loans.
• Investors using equity for a down payment or reserves on the next property (where the program allows).

How it works

• Draw period: usually several years where you can borrow, repay, and borrow again. Payments are often interest-only during this time.
• Repayment period: after the draw period ends, you repay principal and interest, so the payment goes up.
• Rate: usually variable, tied to an index such as the prime rate, so payments can change.
• How much: based on your home's value, what you owe, your credit, and your income. Many programs lend up to about 80–90% of the home's value combined.

Advantages

• Keep your first mortgage. No need to refinance a low rate.
• Pay interest only on what you use. Unused credit costs nothing in interest.
• Flexible. Borrow again as you pay it down during the draw period.

Things to consider

Your home secures the line, so missed payments put it at risk. Variable rates mean payments can rise, and payments increase when the repayment period starts. Some lines have fees, minimum draws, or early-closure fees, and lenders can freeze or reduce a line if home values drop. We'll walk you through the terms before you commit.