Cash in on your home equity
A home equity line of credit (HELOC) provides you with a line of credit that you can draw from as needed — similar to a credit card. You borrow against the equity in your home, and your home serves as collateral for the loan.
What can you do with a HELOC?
Consolidate high-interest debt
Use the cash to pay off student loans, credit cards, or other high interest debt.
Fund home improvements
Pay for a remodel, make important home upgrades, and much more.
Make a big purchase
Cover unexpected bills, a new home, or other expenses.
Spend what you need, pay as you go
Flexibility
Borrow only what you need, as you need it, and make payments only on the amount you borrow
Lower interest rates
With HELOCs you can get lower rates compared to traditional lending options
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HELOC vs home equity loanFrequently asked questions
By Daria Uhlig | Updated Sep 8, 2024
Unlike other home loans, a HELOC doesn’t give you a lump sum upfront. Instead, you’ll receive a line of credit that you can use for things like home renovation projects, debt consolidation, or any other major expenses.
You can borrow as many times as you want, up to your credit limit, during the loan’s draw period. Once the draw period ends, you’ll enter the repayment period to pay off your balance. HELOCs can have draw periods of up to 10 years and repayment periods of up to 20 years.
The amount you can borrow on a HELOC varies based on how much equity you have in your home and other factors. Generally, most lenders offer credit lines around 75% to 85% of your home’s appraised value, minus any outstanding loan balance you have on your first or second mortgage.
HELOCs and home equity loans both let you borrow cash against your equity, and they both use your home to secure the loan. In addition, both are examples of second mortgages.
The primary difference between a HELOC and a home equity loan is the way you receive the cash and repay the loan.
As mentioned earlier, HELOCs give you a line of credit you can draw from as needed throughout the draw period. Depending on the loan, you might be able to make interest-only payments during the draw period.
A home equity loan gives you an upfront lump sum. You make payments on the entire amount beginning the month after you take out the loan. Unlike HELOCs, which typically have variable interest rates, home equity loans come with fixed interest rates, so your payment will stay the same for the life of the loan.
Learn More: Fixed-Rate HELOCs - A Cross Between HELOCs and Home Equity Loans
Even though you’re borrowing against your equity, you’ll still have to qualify for the loan. Here are some common HELOC requirements:
Understanding the pros and cons of HELOCs will help you make an informed decision.
Pros
Cons