A Home Equity Line of Credit (HELOC) is like giving yourself flexible access to the money you’ve already built up in your home. Instead of taking out a big lump sum loan, a HELOC works more like a credit card tied to your house.

Here’s how it works:

1. You’re Borrowing Against Your Home’s Equity

• Your equity is the value of your home minus what you still owe on your mortgage. A HELOC lets you borrow against that equity.
• Lenders will allow you to use up to 90% of your total equity. The maximum will be based on your qualifications. Estimate your available equity here.

2. It Works in Two Phases

• Draw Period (Usually 5–10 years):
  This is when you can use the line of credit—like writing a check or swiping a card. Many lenders only require interest-only payments during this time, which keeps payments low.
• Repayment Period (Usually 10–20 years):
  After the draw period ends, you can’t borrow more. You start paying back what you borrowed, plus interest. Payments are usually higher during this phase.

3. Interest Rates Can Change

• Most HELOCs have variable interest rates, meaning your payment can go up or down as the market changes.
• That’s why running the numbers with a calculator is so important before you borrow.

4. What Makes HELOCs Helpful

• Flexibility: Borrow only what you need, when you need it.
• Lower Rates: Usually much lower than credit cards or personal loans.
• Smart with Debt: You can use a HELOC to pay off high-interest debt faster and cheaper.

Tip from Smart With Debt: Always look at both the short-term payment and the long-term cost. A HELOC can be a great tool—but only if it saves you money now and protects your future.