What is a HELOC?

A HELOC, or home equity line of credit, is a second mortgage that works like a credit card secured by your home. It gives you a revolving credit line you can draw from as you need it during a set draw period, usually at a variable rate, while your first mortgage stays in place.

Because you borrow only what you use and can pull funds over several years, a HELOC suits an open-ended or multi-stage need rather than a single fixed cost.

How does a HELOC work?

The lender approves you for a credit limit based on your equity. You can borrow against that limit, pay it back, and borrow again, much like a credit card. You pay interest only on the balance you actually use, not the full limit. The line sits behind your first mortgage as a second lien, so your original mortgage and its rate do not change.

What is the draw period and the repayment period?

A HELOC runs in two phases. During the draw period, usually about 10 years, you can pull money from the line and your minimum payment is often interest only. When the draw period ends, the repayment period begins, usually up to 20 years. In repayment you can no longer draw, and your payment now includes principal and interest until the balance is gone. Payments typically rise when this shift happens.

What is the interest rate on a HELOC?

National average HELOC rate. Source: Curinos. Verified as of July 13, 2026. Variable rate: 7.23 percent

Most HELOC rates are variable and tied to the prime rate, the baseline banks charge their strongest customers, which sits at 7.50 percent right now. When the Federal Reserve moves and prime changes, your HELOC rate moves with it. As an example, a $50,000 balance at about 7.23 percent costs roughly $301 per month in interest during an interest-only draw period. That payment can change as the rate moves and will rise once principal is added in repayment.

How much can I borrow with a HELOC?

Your limit depends on your equity and the lender's combined loan-to-value cap, commonly 80 to 85 percent of the home's value, with some programs higher. On a $600,000 home with a $350,000 balance, an 80 percent cap puts total borrowing at $480,000, leaving about $130,000 of available line. To work out your own figure, see how to calculate your home equity.

What can I use a HELOC for?

You can use it for almost anything, though it fits ongoing or uncertain costs best. Common uses are a multi-stage home renovation, a standing cash reserve for emergencies, tuition paid over several years, or bridging expenses where you do not know the exact total upfront. You draw as costs arrive rather than taking one lump sum.

What are the requirements to qualify?

Lenders review your equity, credit score, debt-to-income ratio, and income, similar to a mortgage application. You need enough equity to stay within the CLTV cap, an acceptable credit profile, and income that supports the payment. Guidelines differ from one lender to the next. As Emmett Clark, licensed in 18 states with access to more than 240 wholesale lenders, I match each file to the lender whose HELOC terms and CLTV limits fit it.

How is a HELOC different from a home equity loan?

A HELOC is a revolving, variable-rate line you draw from over time. A home equity loan is a fixed lump sum with a fixed payment. For the basics of the other option, read what a home equity loan is, then compare them directly in HELOC versus home equity loan. You can also model payments on the mortgage calculators.