What's a HELOC?

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For many people, a home is their largest asset.  A Home Equity Line of Credit, or HELOC for short, lets you tap into the equity in your home and borrow against it for things like home improvements, consolidating debts or other major expenses.

First things first: What, exactly, is equity?

The equity in your home is the value of your home … minus what you still owe to your mortgage lender. A HELOC allows you to use a portion of the equity in your home by borrowing against it. Your credit score and debt-to-income ratio play a role in what you can qualify for.

How does it work?

A HELOC works almost like a credit card, allowing you to withdraw funds up to your credit limit. But even though you may have access to funds, it’s important to remember to borrow only what you need.

Generally, you can choose to draw at a variable or fixed interest rate—whichever works best for your situation. The revolving line of credit is available to you for a set period of time, known as the draw period. During the draw period, you’ll make payments toward the balance but can continue to draw funds up to your available limit. When the draw period ends, the repayment period begins, and you’ll pay off the remaining balance before the maturity date.

Does a HELOC make sense for you?

HELOCs are generally used for home improvement projects, which can increase the overall value of your home. But they can be used for other large expenses too, like education or paying down high-interest debt. Some lenders may charge fees to open a HELOC. Make sure you have all the details to determine whether a HELOC is right for you.

Can a HELOC help you?

Find out more about using the equity in your home to help pay for what matters to you.

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