Quick answer
A HELOC (home equity line of credit) is a revolving credit line secured by your home: during the draw period you can borrow, repay and borrow again up to a credit limit, then you repay what you owe over a repayment period. The rate is usually variable — an index, most often the prime rate, plus the lender’s margin.
Key facts
How the limit and the rate are set
Lenders cap the combined loan-to-value of your mortgage plus the line. On a $400,000 home with $250,000 owed, a lender capping it at 85% (an example) could offer a line of up to $90,000. With prime at 7% and a 1-point margin, the rate would be 8%; drawing $40,000 would cost about $267 a month in interest alone. When prime moves, your rate and payment move with it.
What to watch
The payment can jump when the draw period ends and principal comes due. A lender may freeze the line or cut the limit if your home’s value falls significantly or your finances change materially; it must tell you in writing within 3 business days after acting. You can also cancel within 3 business days of opening a line on your main home. Model payments with the HELOC payment calculator and read the HELOC guide.
Related terms
Sources
- Federal Reserve H.15 — Bank prime loan rate (Oct 28, 2026)
- CFPB — Example HELOC draw period (CFPB); HELOC repayment period, often up to (CFPB) (Aug 28, 2026)
- 12 CFR 1026.9(c)(1)(iii) — Lender must send written notice of a HELOC freeze or credit-limit cut within (Oct 28, 2026)
- CFPB — Right to cancel a refinance or home equity loan on your principal home (Aug 8, 2024)
- CFPB: What you should know about home equity lines of credit (brochure)
Last reviewed Figures are checked against the sources above. Read our editorial policy. This page is general information, not financial advice — see the disclaimer.