A revolving line of credit secured by your home equity, typically with variable rates.
A Home Equity Line of Credit (HELOC) is a revolving credit line secured by your home equity. Unlike a home equity loan (which provides a lump sum), a HELOC lets you borrow up to a credit limit whenever you need it, similar to a credit card. HELOCs typically have variable interest rates tied to an index plus the lender's margin, making them cheaper initially than fixed-rate home equity loans but exposing you to rate increases. HELOCs have two phases: a draw period (typically 10 years) when you can borrow and pay interest-only, and a repayment period when you may want to repay both principal and interest. HELOCs are popular for home renovations, debt consolidation, and emergencies because rates are lower than credit cards. However, defaulting on a HELOC puts your home at risk because it's secured by your property.