HELOC
Turn your home's equity into a flexible revolving line of credit. Keep your current first mortgage rate and borrow only what you need, when you need it.
How it Works
A HELOC functions like a massive credit card secured by your house. It is a "second mortgage" that sits behind your main mortgage.
Draw Period
Usually the first 10 years. You can borrow, repay, and borrow again up to your credit limit. You only pay interest on the money you actually use.
Repayment Period
Usually the following 10-20 years. The line locks, you can no longer borrow money, and you must pay back the principal plus interest in full.
Variable Interest Rate
HELOC rates are almost always variable, tied to the Prime Rate. As the Fed raises or lowers rates, your HELOC rate will adjust.
Calculating Equity
Lenders generally allow you to borrow up to 80-85% of your home's total value (Combined Loan-to-Value or CLTV), minus what you currently owe.
When to use a HELOC vs Cash-Out Refinance
Choose a HELOC when:
- You have a super low rate on your first mortgage you don't want to lose.
- You need money in stages (like paying contractors over 6 months).
- You want access to emergency funds but may not actually use them.
Choose Cash-Out when:
- Current market rates are lower than your existing mortgage rate.
- You need a single large lump sum immediately (like buying an investment property).
- You prefer a fixed, predictable monthly payment.