A home equity line of credit is a revolving credit line secured by your property. Unlike a lump-sum loan, a HELOC lets you draw, repay and reuse funds during the draw period, making it useful when costs arrive in stages.
How a HELOC works
Your potential credit limit starts with the property value, current mortgage balance and the lender's maximum combined loan-to-value (CLTV). Approval also considers credit, income, debts, occupancy and property eligibility.
- Draw funds as needed up to the available limit
- Variable rates commonly follow prime plus a lender margin
- Payments and access rules change after the draw period
When flexible equity access makes sense
A line of credit can fit phased renovations, tuition, business opportunities, emergency reserves or debt consolidation. It is generally less suited to a fixed one-time expense when predictable payments are the top priority.
What to compare before choosing
Do not compare only the advertised rate. Review the index, margin, introductory period, annual fee, minimum draw, closing costs, rate floor and cap, early-closure fee, draw length and repayment term.
HELOC risks to plan for
A HELOC is secured by your home and the rate may change. Test your budget at a higher rate, avoid treating the credit line as income and keep reserves for payment changes.
Frequently asked questions
Questions homeowners ask
How much can I borrow with a HELOC?
The limit depends on your home's value, mortgage balance, maximum CLTV and qualification. Use our equity calculator for an initial estimate.
Is a HELOC rate fixed?
Most HELOCs are variable, although some programs allow fixed-rate locks on portions of the balance.
Does opening a HELOC replace my mortgage?
No. A HELOC normally sits behind and preserves your existing first mortgage.