Home Equity Line of Credit (HELOC): How It Works
A revolving line of credit secured by your home that you draw on as you need it.
- How you get paid
- A credit line you draw from as needed
- Rate
- Usually variable; some lenders offer fixed-rate options
- Payments
- Often interest-only while you draw, then principal and interest
- Secured by
- Your home
- Best for
- Ongoing or uncertain costs, like renovations done in stages
A home equity line of credit, or HELOC, lets you borrow against the equity in your home as you need it, up to a limit the lender sets. It works a bit like a credit card that’s secured by your house: you can draw money, repay it, and draw again while the line is open.
How a HELOC works
Most HELOCs have two phases.
- Draw period. You can borrow from the line whenever you need to. Many lenders only require interest payments during this phase, though terms differ.
- Repayment period. You can no longer draw, and you repay what you borrowed plus interest over a set number of years. Monthly payments often go up at this point.
Rates on HELOCs are commonly variable, which means your payment can change over time. Some lenders offer a way to fix the rate on part of your balance. Ask about it before you sign.
Who a HELOC tends to suit
- Homeowners with costs that come in stages or are hard to predict, like a renovation.
- People who want to pay interest only on what they actually use.
- Borrowers comfortable with a payment that may change.
Things to weigh
- Your home is the collateral. If you can’t repay, you could lose your home.
- Variable rates can rise, which raises your payments.
- Fees vary. Ask about application, appraisal, annual and early-closure fees.
- Lenders can freeze or reduce a line in some circumstances, such as a drop in your home’s value.
Compare before you choose
Offers differ on minimum line size, credit requirements, rates and fees. Use our comparison directory to filter lenders by how much you want to borrow, or answer a few questions to see options matched to your situation.
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Frequently asked questions
How is a HELOC different from a home equity loan?
A HELOC is a revolving line you can borrow from, repay and borrow from again during the draw period. A home equity loan pays you one lump sum up front with fixed payments.
How much can I borrow with a HELOC?
Lenders usually set a limit based on your home's value, what you owe on your mortgage, and your credit and income. Many cap your combined borrowing at a percentage of your home's value, often around 80%, but limits vary by lender.
What happens if I can't repay a HELOC?
Because the line is secured by your home, missing payments can put your home at risk. Only borrow an amount you're confident you can repay.
Published November 9, 2026. This article is for general information and isn't financial, legal or tax advice. Terms vary by lender and state. We may be compensated by companies featured on this site. See our advertiser disclosure.