Home Equity Line of Credit (HELOC)
If the home equity line of credit (heloc) is on your radar for 2026, here is how it works, who it fits, and what to watch for.
How it works
A HELOC is a revolving line of credit secured by your home, with a variable rate (Prime plus margin, often 8-10%). You draw as needed during a ~10-year draw period - usually interest-only - then repay over ~20 years. It offers flexibility and low upfront cost, up to 85-90% CLTV.
Key things to know
- Combined loan-to-value usually caps near 85% (cash-out refinance at 80%).
- A second lien keeps your first mortgage; a cash-out refinance replaces it.
- Compare the rate type — fixed (home equity loan) vs variable (HELOC).
- Budget for closing costs (often lower or waived on HELOCs).
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Frequently Asked Questions
- What is the home equity line of credit (heloc)?
- A HELOC is a revolving line of credit secured by your home, with a variable rate (Prime plus margin, often 8-10%). You draw as needed during a ~10-year draw period - usually interest-only - then repay over ~20 years. It offers flexibility and low upfront cost, up to 85-90% CLTV.
- Will it affect my first mortgage?
- Only a cash-out refinance replaces your first mortgage. A HELOC, home equity loan, or second mortgage sits behind it and leaves that rate alone.