How Does a HELOC Work? Draw Period, Rates and Risks
Published 15 November 2026 · Mortgages
Try it nowHELOC Calculator →A home equity line of credit (HELOC) lets you borrow against your home’s equity as you need it. Estimate your limit and payments with the HELOC calculator.
How much can you borrow?
Lenders usually allow a combined loan-to-value (CLTV) of 80–90%. With a $400,000 home, a $240,000 mortgage and 85% CLTV: 340,000 − 240,000 = $100,000 line.
The draw period
Typically 10 years. Borrow, repay and borrow again. Many HELOCs need only interest payments during this time.
The repayment period
Usually 20 years. You can’t draw more and must repay principal plus interest, so payments can jump sharply – “payment shock”.
Variable rates
Most HELOCs are tied to the prime rate, so payments rise when the Fed raises rates.
HELOC vs home equity loan
A home equity loan gives a lump sum at a fixed rate with fixed payments – better for one large known cost. A HELOC suits ongoing costs like a renovation.
Risks
Your home secures the loan, so missed payments can lead to foreclosure. Borrow only for things that add value.
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15 Nov 2026