How a HELOC works
A HELOC gives you access to a pool of money, up to a credit limit, secured by the equity in your home. During the draw period (usually 10 years), you can borrow, repay, and borrow again. During the repayment period (usually 20 years), you pay back what you owe.
Most HELOCs have a variable interest rate tied to the prime rate. Some lenders offer a fixed-rate draw option, where you can lock a fixed rate on a portion of your balance.
What you can use a HELOC for
HELOCs are commonly used for:
- Home improvements and renovations
- Debt consolidation (paying off high-interest credit cards)
- College tuition
- Medical expenses
- Large purchases or investments
You should not use a HELOC for everyday expenses, vacations, or anything you cannot afford to repay.
HELOC vs home equity loan
A home equity loan gives you a lump sum at a fixed rate. A HELOC is a revolving line of credit at a variable rate. Use a home equity loan when you know the exact amount you need. Use a HELOC when you want flexibility.
Risks of a HELOC
A HELOC uses your home as collateral. If you cannot make the payments, you can lose your home. Variable rates can also rise, increasing your monthly payment. Borrow only what you need and what you can repay.
Talk to a real person
Still have questions? A licensed loan officer from TouchPoint will answer in plain English. No scripts, no runaround.