The published rules
These are programme rules, not Plinth policy. Where a figure is reset each year — conforming limits, FHA county limits, the USDA fee, the VA fee table — the mechanism is described and the number is not, because a stale number on a lending page is worse than no number.
- Two shapes
- A home equity line of credit is revolving: a limit you can draw on, repay and draw again. A home equity loan is a single lump sum on a fixed schedule.
- The two periods
- A HELOC has a draw period, during which many lenders accept interest-only payments, and then a repayment period, when principal is required. The payment changes at that boundary, sometimes sharply. Know both dates before you sign.
- The rate
- HELOC rates are usually variable and tied to an index. A home equity loan is normally fixed. Which of those you want is a question about the next ten years, not this month.
- The lien
- Both sit behind your first mortgage. Both are secured by the home. Default risks the house exactly as the first mortgage does.
What it will not do
- A variable rate can move against you for the whole draw period. Model the payment at a materially higher rate before deciding.
- It does not fix a first mortgage you dislike. If the first mortgage is the problem, the answer is in the refinance band.
- Interest deductibility depends on what the money is used for and on your own tax position. Ask a tax adviser, not a lender.
What to find out before you go further
- 01The length of the draw period and what the payment becomes on the day after it ends.
- 02The index the rate is tied to, and the lifetime cap.
- 03Whether a fixed lump sum would suit the purpose better than a revolving line.