A HELOC, or Home Equity Line of Credit, is a type of revolving credit that allows homeowners to borrow against the equity in their home—similar to how a credit card works, but using your house as collateral.
To qualify for a HELOC, you typically need at least 15%–20% equity in your home, a credit score of 620 or higher, and a stable income. Lenders also look for a debt-to-income ratio under 43% to ensure you can manage the monthly payments. Most HELOCs are available for owner-occupied homes, including single-family houses, townhomes, and some condos.
Draw funds when you need them during the draw period (usually 5–10 years), and reuse available credit as you repay it.
Because it’s a secured loan, interest rates are typically lower than unsecured options like credit cards or personal loans.
Borrow as needed, up to a set credit limit—similar to a credit card but secured by your home.
Sarah owns a home in Tampa, currently valued at $400,000.
She still owes $250,000 on her mortgage, which means she has $150,000 in equity.
Her lender approves her for a HELOC of $75,000 based on her equity, credit score, and income.
Sarah decides to renovate her kitchen and draws $25,000 from her HELOC.
She only pays interest on the $25,000 she's borrowed—not the full $75,000.
A few months later, she draws another $10,000 for unexpected medical expenses.
As she makes payments, that credit becomes available again (just like a credit card).
Raymond Upchurch
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Ray Upchurch Mortgage & Real Estate Broker
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