How HELOCs Work

A home equity line of credit lets you borrow against the equity in your home — but not all HELOCs work the same way. Understanding the key structural differences helps you compare programs on what actually matters.

HELOC Basics

What a HELOC is, how it differs from a mortgage, and how equity is calculated.

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Fixed vs. Variable Rate

Some HELOCs carry a fixed rate from day one. Others float with Prime. The difference affects your payment certainty.

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Interest-Only vs. Amortizing

Whether you pay principal during the draw period changes your required payment significantly.

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Draw Period

How long you can borrow and repay repeatedly — and why it matters if you plan to reuse the line.

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Initial Draw Requirement

Some programs require you to take a large portion of the line at closing. Others let you draw as needed.

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HELOC Fees

Origination fees, annual fees, prepayment penalties — what to look for and how digital HELOCs differ.

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First, Second & Third Lien

Lien position affects your rate, your eligibility, and which programs are available to you.

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HELOC vs. Home Equity Loan

A line of credit vs. a lump-sum loan — when each makes more sense.

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HELOC vs. Cash-Out Refinance

Tapping equity without replacing your first mortgage vs. refinancing the whole thing.

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Ready to compare programs?

Understanding how HELOCs work is step one. Step two is comparing what different programs actually offer for your property.

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HELOC guidelines change frequently. This content is educational and is not a loan approval, commitment or guarantee.