Home Q&A Definitions HELOC (Home Equity Line of Credit)

HELOC (Home Equity Line of Credit)

HELOC (Home Equity Line of Credit)

Secured credit lines can be used to make large purchases or consolidate high-interest debt like credit cards. A HELOC’s tax-deductible interest makes it more attractive than other loans. Interest may be tax deductible.

The procedure is…

Your home’s equity secures a HELOC. This service works like a credit card when you pay off your bill. During the draw period, you can borrow up to the credit limit set at closing (usually 10 years). After the draw period, repayment begins (usually 20 years).

Home equity loan (HELOC)

You must owe less than your home’s value to get a HELOC. Up to 85% of a home’s market value, minus debt, can be borrowed. A lender will also consider your employment history, monthly salary, and monthly debts.


The interest rate on a home equity line of credit varies monthly. Index and margin determine variable rate. Banks use an index or financial indicator to set consumer loan interest rates. Bank of America uses US currency. The Wall Street Journal publishes the HELOC Prime Rate (HELOC). Consequently, a HELOC’s interest rate can rise or fall. Variable interest rates have a margin added to the index. Fixed-rate loan interest.

HELOC minimum payments include principal and interest. Your monthly payment depends on your balance, interest rate, and additional principal payments. Make additional principal payments whenever possible to save on interest and reduce debt faster.

Fixed-rate loans

Some lenders, like Bank of America, offer a fixed-rate HELOC option. Fixed-rate balances help avoid interest rate hikes.