HELOC

Banking & Credit

A Home Equity Line of Credit (HELOC) is a revolving credit line secured by your home equity, usually capped at 80-85% of your home's value minus the existing mortgage balance. HELOCs have a 5-10 year draw period (during which you can borrow and only owe interest) followed by a 10-20 year repayment period (principal + interest). Rates are variable, typically prime + 0-2%. HELOCs are useful for home improvements, education funding, or as a low-cost emergency backup, but the variable rate and home collateral mean discipline is essential. The interest may be tax-deductible if used for home improvements.