Rates & Loans
What is home equity and how does a HELOC work?
Updated Jul 1, 2026
The short answer
Home equity is the share of your home you actually own — its value minus what you still owe. A home equity line of credit (HELOC) lets you borrow against that equity as a revolving line, usually at a variable rate, drawing funds during a set period and repaying over time. Because your home secures the debt, defaulting can put the property at risk.
Key points
- Equity = home value − mortgage balance.
- A HELOC is a revolving credit line secured by your home.
- Rates are usually variable; payments can change.
- Your home is collateral, so borrow cautiously.
Draw and repayment periods
HELOCs typically have a draw period when you can borrow and make interest-only payments, followed by a repayment period when principal is due, which can raise your payment sharply. Understand both phases before borrowing.
Sources
Every claim above traces to a public government source.
- ViewT1What is a home equity line of credit (HELOC)?
Consumer Financial Protection Bureau · Government / primary · 2024