Using Your Home's Equity: The HELOC Guide

By The Finanspilot Team | September 6, 2025

A house with a line connecting it to a large sum of money, representing a home equity line of credit.

A **Home Equity Line of Credit (HELOC)** is a financial product that allows you to borrow against the equity in your home. Unlike a traditional loan, a HELOC functions more like a credit card. Instead of receiving a single, lump sum, you get access to a revolving line of credit that you can draw from as needed during a set period, typically known as the draw period.

You only pay interest on the amount you actually borrow, not the entire credit limit. This flexibility makes a HELOC an attractive option for homeowners who need ongoing access to funds for projects like home renovations, covering college tuition, or managing unexpected expenses.

How a HELOC Works

A HELOC is broken into two main phases: the **draw period** and the **repayment period**.

**Draw Period:** This is the initial phase, usually 5 to 10 years, where you can borrow money as you need it. You are only required to make interest-only payments on the outstanding balance.
**Repayment Period:** After the draw period ends, you can no longer borrow money. You will then begin making principal and interest payments to pay off the remaining balance, similar to a traditional loan.

Using Our HELOC Calculator

Our **HELOC Calculator** can help you understand your potential borrowing power and how a HELOC might impact your finances. By entering some simple information, you can get a clearer picture of your options.

The calculator will typically ask for:

**Your Home's Value:** The current market value of your property.
**Your First Mortgage Balance:** The amount you still owe on your primary mortgage.
**Your Desired Loan-to-Value (LTV) Ratio:** The percentage of your home's value you want to borrow against.

This information will help you estimate your potential credit limit and plan accordingly. Before committing to a HELOC, it's crucial to understand the terms and how the variable interest rate can affect your payments over time. Our calculator is the first step toward making an informed decision about your home's equity.