HELOC: a line of credit against your home
Borrow what you need, when you need it, up to a limit — and only pay interest on what you've drawn.
What a HELOC is
A home equity line of credit works like a credit card secured by your home. The lender approves a limit; you draw against it during a draw period (commonly 5–10 years) and repay during a repayment period after that. Your first mortgage stays untouched.
Why it's the fastest-growing way to use equity
With so many homeowners holding mortgages from 2020–22, replacing that rate makes little sense. Second liens — HELOCs and fixed seconds — are how most equity is being accessed right now. ICE's mortgage data put second-lien lending at an 18-year high earlier this year, with roughly 54% of equity extraction running through second liens rather than cash-out refinances.
Fixed or variable?
Most HELOCs carry a variable rate tied to an index, so your payment can move. Some lenders let you lock a drawn balance at a fixed rate. Ask.
HELOC vs. home equity loan
| HELOC | Home equity loan | |
|---|---|---|
| You receive | A limit to draw on | A lump sum |
| Rate | Usually variable | Usually fixed |
| Interest charged on | What you've drawn | The full amount |
| Best when | Costs arrive over time | You know the number |
| First mortgage | Unchanged | Unchanged |
What to ask on the call
- How long is the draw period, and what happens when it ends?
- Is there an annual fee or an inactivity fee?
- Can I lock a fixed rate on a drawn balance?
- What's the minimum draw?
- How quickly can it fund?
[Confirm with each lending partner that HELOCs are a product they offer, and in which states.]