HELOC

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Definition

HELOC (Home Equity Line of Credit)

A HELOC, or Home Equity Line of Credit, is a revolving credit line secured by a borrower’s home, allowing homeowners to borrow against the available equity in their property. It functions similarly to a credit card, where funds can be drawn, repaid, and reused up to an approved limit during the draw period.

Description

Trusted Partnerships Built

HELOCs provide flexible access to funds for homeowners who have built sufficient equity in their property. They are commonly used for home improvements, debt consolidation, education expenses, emergency reserves, or investment opportunities.

Equity-Based

Loan amount is determined by the home’s value, existing mortgage balance, and lender loan-to-value (LTV) limits.
Draw Period

Typically 5–10 years during which the borrower can access funds as needed.
Repayment Period

Follows the draw period, often 10–20 years, during which the balance is repaid.
Interest Rates

Usually variable and tied to a benchmark rate, such as the prime rate.
Payment Structure

During the draw period, payments may be interest-only; principal repayment begins in the repayment phase.
Lien Position

Can be structured as a second lien or, in some cases, a first-lien HELOC.
Flexibility

Borrowers only pay interest on the amount they use, not the full credit limit.
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