HELOC Loans

A HELOC (Home Equity Line of Credit) is a flexible loan that allows homeowners to borrower money against the equity built up in their home. 

  1. Collateral: Your home serves as collateral for the HELOC. You’re borrowing against the available equity in your home.
  2. Revolving Credit: Similar to a credit card, a HELOC provides a revolving line of credit. As you repay the outstanding balance, the available credit replenishes. You can borrow as little or as much as you need during the draw period (typically 10 years) up to the credit limit established at closing.
  3. Interest Rate: HELOCs often have a lower interest rate than some other loans. 
  4. Variable Rate: The interest rate on a HELOC is variable, calculated from an index (such as the U.S. Prime Rate) and a constant margin. It can change month to month.
  5. Draw and Repayment Periods: After the draw period, which is typically 10 years, the repayment period begins (usually 20 years).

Determining your homes equity is easier than you think. 

  1. Estimate Your Home’s Value:
    • Begin by finding out your home’s current market value. You can use online home price estimators or consult a professional appraiser.
    • Keep in mind that online estimators provide estimates based on algorithms, while appraisers assess the true value.
  2. Find Out What You Owe:
    • Check your most recent mortgage statement to determine the outstanding balance on your mortgage.
    • This balance includes any other loans secured by your property, such as second mortgages or home equity loans.
  3. Calculate Your Equity:
    • Subtract the mortgage balance from the estimated market value of your home.
    • The formula is: Home Equity = Current Home Value - Mortgage Balance.


Example: If your home is valued at $300,000 and you owe $200,000 on the mortgage.  You would have $100,000 of equity in the home.


To qualify for a HELOC, you generally need a fair credit score (usually above 640), and a manageable debt-to-income ratio. Other factors, such as your income, assets, and the property's appraisal value, will also be considered.

Both options use your home as collateral, offering lower interest rates compared to credit cards or personal loans.  However, there are a few differences to consider.

HELOC (Home Equity Line of Credit):
  • A HELOC is like having a credit card secured by your home’s equity.
  • HELOC Key Points:
    • Draw Period: During the draw period (usually 10 years), you can borrow funds as needed, up to a predetermined credit limit.
    • Flexible Repayment: Your monthly payments during the draw period can be flexible, including interest-only options.  After the draw period expires, your loan converts to a principal and interest loan (usually 20 Years). 
    • Revolving: As you pay back what you borrow, your available credit replenishes, similar to a credit card.
    • Variable Interest Rate: Most HELOCs have a variable interest rate tied to market conditions.
  • Best For: If you want flexibility to borrow over time or for ongoing expenses.
HELOAN (Home Equity Loan):
  • A HELOAN provides a lump sum of money upfront.
  • HELOAN Key Points:
    • Fixed Payment: You receive a fixed amount and start repaying it immediately through regular principal and interest payments.
    • Not Revolving: Unlike a HELOC, the credit line does not replenish as you pay it down.
    • Fixed Interest Rate: HELOANs typically have a fixed interest rate.
  • Best For: If you need a one-time lump sum for a specific purpose (e.g., home improvements, debt consolidation or other major purchases).