HELOC fundamentals
HELOC fundamentals cover the basics of how a home equity line of credit works: it is a revolving line of credit secured by the equity in your home, letting you draw funds as needed, repay them, and draw again. You pay interest only on what you actually use during the draw period.
- Fixed-rate vs. variable-rate HELOC
- HELOC draw period vs. repayment period
- HELOC glossary: key terms explained
- HELOC interest-only payments explained
- HELOC vs. home equity loan: key differences
- How does a HELOC work?
- How much can you borrow with a HELOC?
- Is a HELOC a second mortgage?
- Is HELOC interest tax-deductible?
- What is a HELOC?
- What is home equity & how to calculate it
Frequently asked questions
How does a HELOC actually work?
A HELOC works like a credit card secured by your home. During the draw period, often around 10 years, you borrow up to your limit, repay, and reuse the funds, paying interest only on your outstanding balance. A repayment period follows, when you pay back principal plus interest.
How much equity do I need to get a HELOC?
Most lenders want you to keep some equity after borrowing, typically allowing a combined loan-to-value ratio up to 80–85%. In practice, you generally need at least 15–20% equity remaining in your home. Equity is your home's value minus what you still owe on it.