What are HELOC interest rates based on?

HELOC rates are typically variable and tied to the Prime Rate plus a margin (usually 0-3%). When the Federal Reserve changes rates, your HELOC rate adjusts accordingly. Some lenders offer fixed-rate options or rate caps to limit how much your rate can increase.

What are the minimum draw requirements for a HELOC?

Many HELOCs have minimum draw amounts, typically $500-$10,000 per withdrawal, and may require an initial draw at closing. Some have minimum outstanding balance requirements during the draw period. Check with your lender about their specific requirements.

Can I convert my HELOC to a fixed-rate loan?

Many lenders offer conversion options that let you convert all or part of your HELOC balance to a fixed-rate loan. This protects you from rate increases and provides predictable payments. Conversion options, rates, and terms vary by lender.

HELOC

Q: How does a HELOC work?

A HELOC works like a credit card secured by your home. You're approved for a maximum credit limit and can draw funds as needed during the draw period (typically 10 years). You pay interest only on the amount you use, not the entire credit limit. After the draw period, you enter repayment where you pay principal plus interest.

Home Equity Line of Credit - Flexible access to your home's equity

6.75%*

Starting Variable APR

•

$500K

Maximum Credit Line

•

30 Years

Maximum Term

Apply for HELOC

Key Features of HELOCs

Revolving Credit Line

Use funds as needed, pay back, and reuse available credit during the draw period

Interest-Only Option

During the draw period, pay only interest on what you use, not the entire credit line

Flexible Access

Access funds via online banking, checks, or debit card when you need them

What Is a HELOC?

A Home Equity Line of Credit (HELOC) is a revolving credit line secured by your home's equity. Unlike a traditional home equity loan that provides a lump sum, a HELOC works more like a credit card - you have access to a pre-approved credit limit that you can draw from as needed, pay back, and use again during the draw period.

HELOCs typically have two phases: the draw period (usually 10 years) when you can access funds and may pay interest-only, followed by the repayment period (typically 10-20 years) when you must pay both principal and interest. The interest rate is usually variable, meaning it can change based on market conditions.

Because your home serves as collateral, HELOCs generally offer lower interest rates than unsecured credit options like personal loans or credit cards. The amount you can access depends on your home's value, existing mortgage balance, creditworthiness, and income. Most lenders allow you to borrow up to 80-90% of your home's value minus what you owe on your primary mortgage.

How Does a HELOC Work?

The Two-Phase Structure

A HELOC operates in two distinct phases that provide maximum flexibility during the draw period and predictable repayment afterward.

Draw Period (Typically 10 Years)

• Access funds as needed up to your credit limit
• Pay interest only on the amount you use
• Make interest-only payments (minimum required)
• Repay and reuse available credit
• Variable interest rate applies

Repayment Period (Typically 10-20 Years)

• No more access to credit line
• Pay principal and interest monthly
• Fixed payment schedule
• Rate may remain variable or convert to fixed

HELOC Timeline Example

Years 1-10: Draw Period

$100,000 Credit Line Available

Use $30K for kitchen renovation
Interest-only payment: ~$200/month*
$70K still available to use

Years 11-30: Repayment Period

Principal + Interest Payments

$30K balance at 8% over 20 years
Monthly payment: ~$251/month*
No access to additional funds

*Example rates and payments for illustration only. Actual rates and payments will vary based on creditworthiness and market conditions.

HELOC Requirements

Credit Requirements

✓Minimum credit score: 680+
✓Better rates with 740+ score
✓Strong payment history required

Equity Requirements

✓Minimum 20% home equity
✓Maximum 90% combined LTV
✓Professional appraisal required

Income Requirements

✓Debt-to-income ratio under 40%
✓Stable employment for 2+ years
✓Documented income verification

Calculate Your HELOC Potential

Home Equity Calculator

Calculate your borrowing power and estimated payments

Your Information

Home Value

Current Mortgage Balance

Credit Score Range

Desired Loan Amount

Maximum available: $160,000

Loan Term (Years)

Your Results

$200,000

Available Home Equity

50.0% of home value

$160,000

Max Loan Amount

7.25%

Estimated Rate*

$913

Estimated Monthly Payment

15 year term at 7.25%

* Rate Disclaimer: Estimated rates shown are for illustrative purposes only. Actual Annual Percentage Rate (APR) may vary based on credit profile, loan-to-value ratio, loan amount, and other factors.

* Example: For a $$100,000 home equity loan with a 15-year term at 7.25% APR, estimated monthly payment is $913. APR and payment shown assume excellent credit (740+ score), combined loan-to-value of 80% or less, and owner-occupied primary residence.

* Payment shown is principal and interest only and excludes property taxes, insurance, and other fees. Actual payment will be higher.

* Rate and approval subject to credit and property approval. Rates are subject to change without notice.

Licensed in 15 states: AL, AR, CO, DE, FL, IN, MI, ND, OH, PA, RI, SC, SD, TN, WV. NMLS ID #1987891

Pros and Cons of HELOCs

Advantages

✓Flexibility: Use only what you need, when you need it
✓Interest-only payments: Lower payments during draw period
✓Revolving credit: Pay back and reuse available credit
✓Tax benefits: Interest may be deductible for home improvements
✓Multiple access methods: Checks, cards, online transfers

Considerations

⚠Variable interest rate: Payments can increase over time
⚠Payment shock: Higher payments when repayment period begins
⚠Home as collateral: Risk of foreclosure if payments missed
⚠Spending temptation: Easy access may lead to overspending
⚠Closing costs: Fees for appraisal, origination, and annual fees

Best Uses for a HELOC

🔨

Ongoing Renovations

Perfect for multi-phase projects where costs are uncertain, like whole-house renovations

Pay as work progresses

🎓

Education Costs

Draw funds each semester for tuition, living expenses, or ongoing educational needs

Flexible for changing needs

💼

Business Investment

Fund business expansion, equipment purchases, or manage cash flow fluctuations

Use only what you need

🏥

Medical Expenses

Handle unexpected medical bills or ongoing treatment costs with flexible access

Emergency backup available

🛡️

Emergency Fund

Maintain access to low-cost funds for unexpected expenses or financial emergencies

Peace of mind backup

💳

Debt Management

Pay off high-interest debt gradually or manage multiple debt payments strategically

Lower interest alternative

HELOC vs Home Equity Loan

Feature	HELOC	Home Equity Loan
Interest Rate	Variable rate	Fixed rate
Disbursement	Draw as needed	Lump sum at closing
Payment Structure	Interest-only option during draw	Fixed monthly payments
Best For	Ongoing or uncertain costs	Large one-time expenses
Rate Risk	Rate can increase	No rate risk
Access	Ongoing access during draw period	One-time access at closing