How a HELOC Works

A HELOC has two phases: the draw period (typically 10 years) during which you can borrow and repay funds, and the repayment period (typically 20 years) during which you repay the outstanding balance. Interest rates are typically variable, tied to the prime rate. Most lenders allow you to borrow up to 80–85% of your home value minus your existing mortgage balance.

Common Uses

• Home improvements and renovations
• Debt consolidation (paying off high-interest credit cards)
• Education expenses
• Emergency fund
• Investment opportunities
• Major purchases

HELOC vs. Cash-Out Refinance

A HELOC keeps your existing first mortgage in place and adds a second lien. A cash-out refinance replaces your entire mortgage with a new, larger loan. If your current mortgage has a low rate, a HELOC may be preferable to avoid refinancing at a higher rate. If you need a large lump sum, a cash-out refinance may offer better terms. We can help you evaluate both options.

Qualification Requirements

Typically: minimum 620 credit score (higher for better rates), at least 15–20% equity in your home, stable income and employment history, and a debt-to-income ratio below 43–50%. The amount you can borrow depends on your home value, existing mortgage balance, and lender guidelines.