A Home Equity Line of Credit (HELOC) is an excellent financial tool for homeowners with at least 20% equity in their property. It uses the equity you’ve built up as collateral, allowing you flexible access to funds as needed. As you continue to pay down your mortgage, your available credit limit can grow. HELOCs are often used as a second mortgage solution for those seeking structured repayment options over a set term.

Unlike a traditional loan, a HELOC functions as revolving credit — similar to a credit card. You can borrow and repay funds as necessary during the draw period (typically 5–10 years), during which you only pay interest. After the draw period ends, a repayment period (10–20 years) begins, requiring payments on both the principal and interest.

Because your home secures the credit line, HELOCs offer lower interest rates than unsecured credit options. These rates are usually variable and tied to the prime lending rate. However, many lenders allow you to lock in a fixed rate on portions of your HELOC balance for added stability.

Initially, your minimum monthly payment covers only the interest accrued. Once the draw period concludes, you’ll begin paying both principal and interest, resulting in higher monthly payments.

Deciding if a HELOC is the right option for you depends on your financial goals and situation. Speaking with an experienced mortgage professional can help you fully understand the benefits and risks — and determine if a HELOC is the best solution or if another product might suit your needs better.