How Does a HELOC Work?

A HELOC allows you to borrow against the equity you have built up in your home and to use your home as collateral to extend a line of credit.

When you pay the outstanding balance on your HELOC, the available credit increases back to the maximum amount available. A HELOC functions similarly to a credit card in this way, but with a much lower interest rate. You can borrow against this credit line again as needed, and in any amount that you need up to the maximum.

A HELOC's draw period is typically as long as 10 years, and you can continue drawing from the line of credit over that period as many times as you need as long as you replenish funds as needed. After the draw period, you will have a repayment period, typically as long as 20 years, to pay back the borrowed principal with interest.