You've built something here. Know your options.
A HELOC lets an eligible homeowner borrow against the equity in their home, without replacing the mortgage they already have. Theresa explains how it works in plain English, so you can decide whether it fits what you're planning.
A line of credit secured by your home
Instead of one lump sum, a HELOC gives you an approved limit you can draw from, pay back and draw from again, subject to qualification and the terms of the specific product.
- Revolving creditBorrow, repay and borrow again up to your approved limit, rather than taking all the money at once.
- Your first mortgage stays putYou borrow against your equity without refinancing the mortgage you already have.
- Draw what you needUse part of the line up front, or smaller amounts over time as your plans unfold.
Three stages to understand
Every HELOC has its own terms. These are the broad strokes Theresa walks through with you first.
Your limit is set
The line is based on your home's value, less what you still owe on it. The equity you've built is the starting point.
The draw period
For a set time, you can borrow, repay and borrow again. Many lenders allow interest-only payments during this stage.
The repayment period
Afterwards, you pay back principal and interest together, which can raise your monthly payment. Plan for it early.
HELOCs usually carry a variable rate, so the payment can change over time. How long each stage lasts and how the rate is set depend on the lender and the product.
HELOC vs. cash-out refinance
Both use your home's equity. They go about it in very different ways.
A traditional refinance replaces your mortgage without taking equity out at all. Read more about cash-out refinancing, or ask Theresa to compare the options using your own numbers.
Borrowing with a purpose
A HELOC is still borrowing, secured by your home. It tends to make the most sense when there's a clear plan for it.
Some homeowners also look at one to consolidate other debt. Whether that's sensible depends on your situation, and Theresa will talk it through honestly.
Know this before you draw
Your home secures it
Missing payments puts the home at risk, so borrow only what you have a plan to repay.
The payment can move
With a variable rate, your payment can rise or fall over time.
Repayment changes things
When the draw period ends and principal is added, the monthly payment can go up noticeably.
Qualification still applies
Lenders look at your equity, credit, income, debts and payment history. Guidelines vary by lender.
Frequently asked
How is my HELOC limit decided?
It's generally based on your home's appraised value minus what you still owe on your mortgage, along with the lender's guidelines. The more equity you've built, the larger the line you may qualify for.
Do I have to refinance my current mortgage?
No. A HELOC lets you borrow against your equity without replacing your existing first mortgage.
Will my HELOC payment change?
It can. HELOCs usually carry a variable rate, so the payment can move with it. Payments also typically increase once the repayment period begins and principal is included.
What's the difference between a HELOC and a home equity loan?
A HELOC is a revolving line you draw from as needed. A home equity loan gives you a lump sum with a set repayment schedule, which can suit a single, known expense. Theresa can help you weigh which structure fits your plans.
Is a HELOC better than a cash-out refinance?
Neither is better for everyone. A HELOC keeps your current mortgage in place; a cash-out refinance replaces it. Which one makes sense depends on your current loan, your goals and your circumstances.
Ask the Huntress
Tell Theresa what you're planning. She'll look at your equity, your timeline and your budget, and tell you honestly which option she'd consider in your shoes.
(913) 705-0049