HELOC (Home Equity Line of Credit)
If the heloc (home equity line of credit) is on your radar for 2026, here is how it works, who it fits, and what to watch for.
How it works
A HELOC (home equity line of credit) is a revolving line secured by your home, letting you draw and repay as needed during a draw period - typically at a variable rate - rather than refinancing your first mortgage. It leaves your existing low-rate mortgage untouched, which is appealing when current rates are higher than your locked-in rate.
Key things to know
- Weigh the new rate and term against your current loan — a refinance resets the clock.
- Budget 2-5% of the balance in closing costs (or roll them in for a higher rate).
- Find your break-even: costs divided by monthly savings.
- Cash-out is capped at 80% LTV conventional/FHA; VA cash-out can reach 100%.
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Frequently Asked Questions
- What is the heloc (home equity line of credit)?
- A HELOC (home equity line of credit) is a revolving line secured by your home, letting you draw and repay as needed during a draw period - typically at a variable rate - rather than refinancing your first mortgage. It leaves your existing low-rate mortgage untouched, which is appealing when current rates are higher than your locked-in rate.
- What does it cost?
- Most refinances run 2-5% of the loan in closing costs. A no-closing-cost version trades those fees for a slightly higher rate.