Home Equity Lines of Credit, Explained Plainly
Everything you need to know about HELOCs in 2026 — how they work, current rates, requirements, the math behind monthly payments, and how the rules differ in your state. We're a direct lender across 22 states, so when you're ready, you can apply in under 60 seconds.
What is a HELOC?
A HELOC — Home Equity Line of Credit — is a revolving credit line secured by your home's equity. Think of it as a credit card backed by your house, except with a much higher limit and a much lower interest rate.
The mechanics, simplified:
- The lender approves you for a credit limit based on your home value, existing mortgage balance, credit score, and income. Most lenders will approve up to 80-85% of your home's value, minus what you owe on the first mortgage.
- You draw money as you need it. Want $20,000 for a kitchen remodel? Take $20,000. Need another $5,000 in three months? Take $5,000. You're not committed to using the full credit line.
- You pay interest only on what you've borrowed during the draw period (typically 10 years). If your line is $100,000 but you've only drawn $30,000, you pay interest on $30,000.
- After the draw period ends, the loan converts to repayment (typically 20 years). You stop being able to draw new funds and start paying back principal plus interest until the balance is zero.
- The loan is secured by your home. Like a mortgage, if you stop paying, the lender can foreclose. But used responsibly, a HELOC is one of the cheapest forms of credit available to homeowners.
Who qualifies for a HELOC in 2026?
Most lenders require:
- At least 15-20% equity in your home — meaning your existing mortgage is no more than 80-85% of the home's value
- Credit score of 620 or higher — though 700+ unlocks the best rates
- Debt-to-income ratio under 43% — your total monthly debt payments (including the new HELOC) divided by your gross monthly income
- Stable, verifiable income — W-2, 1099, or self-employment with two years of tax returns
- Primary residence — most lenders don't HELOC investment properties (we have specialty programs for second homes; investment property HELOCs are rare)
How much can you borrow?
The standard formula: (home value × 0.85) − existing mortgage balance = max HELOC line
Real example. Your home is worth $600,000. You owe $300,000 on the first mortgage.
$600,000 × 0.85 = $510,000 (max combined loan)
$510,000 − $300,000 = $210,000 max HELOC line
Your credit profile and income may bring that lower. Use the HELOC calculator to model your specific numbers.
Find out what you actually qualify for
60-second rate check. No hard credit pull. No commitment. Available in all 22 states we're licensed in.
Check My HELOC RateHELOC vs. cash-out refinance: which is right?
This is the most common decision homeowners face when they have equity to access. The honest answer:
| Factor | HELOC | Cash-Out Refinance |
|---|---|---|
| Structure | Revolving credit line | New larger first mortgage, lump sum cash |
| Interest rate | Variable (tied to prime) | Fixed (most loans) |
| Best when | You need flexible access over time | You need a lump sum and want rate certainty |
| Cost to set up | Lower closing costs ($0-$500 typical) | Higher closing costs (2-5% of loan) |
| Affects existing mortgage | No — it's a second loan | Yes — replaces your first mortgage |
| Tax deductible | Only for home improvements | Same rules apply |
Use a HELOC if: you want flexibility, your current mortgage rate is good, or you're not sure exactly how much you'll need.
Use a cash-out refinance if: you need a specific lump sum, your current mortgage rate is high enough that a refi makes sense regardless, or you want fixed payments.
Read our deep comparison: HELOC vs cash-out refinance →
Find HELOC information for your state
HELOC rules vary by state — homestead protections, state-specific lending limits, and recording fees all differ. We're licensed in 22 states. Pick yours:
Frequently asked questions
What is a HELOC and how does it work?
A HELOC is a revolving credit line secured by your home's equity. You have a credit limit you can draw from over a draw period (typically 10 years), pay interest only on what you use, then enter a repayment period (typically 20 years) where you pay back principal plus interest.
What are HELOC requirements in 2026?
Most lenders require at least 15-20% home equity, a credit score of 620+, debt-to-income ratio under 43%, verifiable income, and primary residence. Credit scores above 700 unlock the best rates.
How much can I borrow with a HELOC?
Most lenders allow up to 80-85% of your home's value minus your existing mortgage. A $500K home with a $200K mortgage typically supports $200-225K of HELOC line.
Are HELOC interest payments tax deductible?
Only if the funds are used to buy, build, or substantially improve the home that secures the loan. HELOC interest used for other purposes (debt consolidation, vacations, education) is not deductible under current IRS rules.
What's the difference between a HELOC and a home equity loan?
A HELOC is a revolving credit line with variable rates. A home equity loan is a one-time lump sum at a fixed rate with fixed monthly payments. HELOCs are more flexible; home equity loans are more predictable.
Can I pay off a HELOC early?
Yes. Most HELOCs have no prepayment penalty. You can pay down principal anytime during the draw period, which reduces your interest cost and frees up your credit line for future use.
What's a HELOC interest rate based on?
Most HELOCs are variable-rate loans tied to the prime rate (currently 7.25% as of April 2026), plus a margin set by the lender (typically 0% to 2.5%). Your effective APR depends on your credit, LTV, and lender. Some lenders offer fixed-rate HELOCs or fixed-rate conversion options.
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