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Home Equity Line of Credit (HELOC)

Tap your home's equity without giving up your current mortgage

If you've owned your home for a few years, you've likely built real equity. A HELOC lets you borrow against that equity as you need it, and you keep your existing first mortgage, including its rate.

What Is a HELOC?

A HELOC is a revolving line of credit secured by your home. It works much like a credit card, but with a much larger limit and your home as collateral. You're approved for a maximum amount, draw what you need when you need it, and pay interest only on the amount you've actually borrowed.

A HELOC has two phases:

  • Draw period: you can borrow, repay, and borrow again up to your credit limit
  • Repayment period: the line closes to new draws, and you pay down the remaining balance

Most HELOCs carry a variable rate, so your rate and payment can change over the life of the line.

Who It's For

  • Homeowners with a low first-mortgage rate who don't want to refinance it away
  • Homeowners planning projects that will be paid for in stages over time
  • Borrowers who want a financial cushion available without paying interest until they use it

Common Uses

  • Home renovations and repairs
  • Consolidating higher-interest debt
  • Education expenses
  • Major purchases or unexpected expenses
  • A down payment on an investment property or second home

HELOC vs. Cash-Out Refinance


HELOC

Cash-Out Refinance

Your first mortgage

Stays in place

Replaced with a new loan

How you receive funds

Draw as needed

One lump sum

Interest

Only on what you use

On the full new loan amount

Rate type

Usually variable

Usually fixed

If your current rate is well below today's market, a HELOC usually makes more sense than giving up that rate. If you need a large lump sum and want a predictable payment, a cash-out refinance may serve you better. We'll run both and show you the numbers.

What to Know Before You Apply

  • Your home is the collateral. Borrow only what you have a plan to repay.
  • Variable rates can rise. Make sure your budget can handle a higher payment.
  • Lenders limit how much you can borrow based on your home's value, your current mortgage balance, credit, and income.
  • Tax treatment varies. Interest may be deductible in some cases, so check with your tax advisor.