What is a HELOC?
A HELOC is a revolving credit line secured by your home's equity — the difference between what it's worth and what you still owe. Instead of a lump sum, you get a limit you can draw from as needed, like a credit card backed by your house.
It works in two phases. During the draw period you borrow and repay flexibly, usually paying only interest. After that, the repayment period begins: the line closes to new draws and you pay off the balance with principal-and-interest payments.
Why it matters
A HELOC can be a flexible, lower-cost way to fund renovations, consolidate debt, or cover big expenses — especially attractive when you have a low first-mortgage rate you don't want to disturb with a refinance. Because you only pay interest on what you draw, an unused line costs little.
The risks are real, though. It's secured by your home, the rate is usually variable, and the interest-only draw period can lull you into treating it as cheap money — until repayment starts and the payment jumps. Understanding the credit line and both payment phases before you borrow is what keeps a HELOC a tool rather than a trap.
What to do next
Estimate your available line here, then decide how much you'd actually draw — borrowing the maximum just because it's available is how people get overextended. Look closely at the repayment-period payment, not just the interest-only figure, and make sure it fits your budget.
Because most HELOC rates are variable, stress-test by entering a rate a few points higher to see how the payment holds up. And compare against a cash-out refinance if lowering your first-mortgage rate is also on the table.
Frequently asked questions
How much can I borrow with a HELOC?
Lenders cap your combined loan-to-value (CLTV) — your mortgage plus the HELOC — usually at 80–90% of your home's value. Your available line is that CLTV limit times the home value, minus your current mortgage balance. On a $500,000 home with a $300,000 mortgage and an 85% limit, that's up to $125,000.
What is CLTV?
Combined loan-to-value is all the debt secured by your home divided by its value. If you owe $300,000 on a $500,000 home, your current CLTV is 60%. Lenders let you borrow up to their CLTV ceiling (often 85%), so the gap between your current CLTV and that ceiling is your borrowing headroom.
What's the difference between the draw period and the repayment period?
The draw period (often 10 years) is when you can borrow and repay flexibly, typically making interest-only payments. When it ends, the repayment period (often 20 years) begins: you can no longer draw, and payments rise to cover principal plus interest, fully paying off the balance.
Why do HELOC payments jump after the draw period?
During the draw period, interest-only payments keep your balance flat. Once repayment starts, you must pay down that entire balance over the remaining term, so the payment steps up — sometimes sharply. This 'payment shock' catches borrowers who only budgeted for the interest-only phase.
Is a HELOC better than a cash-out refinance?
It depends. A HELOC leaves your primary mortgage (and its rate) untouched and only charges interest on what you draw — good if you have a low mortgage rate. A cash-out refinance replaces the whole loan, which can make sense if you'd also lower your rate. Compare both for your situation.
Are HELOC rates fixed or variable?
Most HELOCs have variable rates tied to the prime rate, so your payment can rise or fall over time. Some lenders offer fixed-rate options on portions you draw. This calculator uses the rate you enter; if your rate is variable, run a higher rate to stress-test the payment.
Available line = home value × CLTV limit − mortgage balance; payments use the standard amortization formula (2026).