HELOC
A line of credit on your home that lets you keep your current first mortgage and its rate.
How it works
A home equity line of credit sits in second position behind your existing first mortgage. You draw against it as needed rather than receiving a lump sum, and you pay interest only on what you have drawn.
The case for a HELOC over a cash out refinance is usually straightforward: if the rate on your existing first mortgage is well below what is available today, refinancing the whole balance to access equity means giving up that rate on the entire loan. A second position line leaves the first mortgage untouched.
The case against is that HELOC rates are typically variable and tied to an index, so the payment can move. Whether that is acceptable depends on the size of the draw and how quickly you intend to pay it back.
Who it fits
This program is usually the right tool when:
- Homeowners holding a first mortgage at a rate well below current market
- Borrowers who need access to funds over time rather than all at once
- Renovation projects where the total cost is not known upfront
- Borrowers who want a standby line available without drawing on it
What to watch for
The parts nobody leads with.
- Rates on most HELOCs are variable and tied to an index. The payment can change.
- Draw periods end. Understand what happens at the transition into the repayment period before you take the line.
- Some lines carry early closure fees if the account is closed inside a defined period.
Common questions
Is a HELOC better than a cash out refinance?
It depends almost entirely on the rate of your existing first mortgage. If that rate is well below what is available today, keeping it in place and adding a second position line usually costs less overall than refinancing the entire balance at a higher rate. If your existing rate is at or above current market, a cash out refinance is often the cleaner structure.
Does taking a HELOC affect my existing mortgage?
No. A HELOC is a separate loan recorded in second position. Your existing first mortgage, its rate, and its term stay exactly as they are.
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