Home equity
HELOC (Home Equity Line of Credit)
A revolving, variable-rate line of credit secured by your home's equity, with an interest-only draw period followed by a repayment period when the balance amortizes.
What does HELOC mean?
A HELOC works like a credit card backed by your house. During the draw period — often 10 years — you borrow, repay, and re-borrow up to your limit, usually paying interest only.
Then the repayment period begins and the balance amortizes, which can raise the payment sharply. The rate is variable, tied to prime, so it moves with the market.
A Michigan example
An owner whose home has risen in value can open a HELOC against that new equity while leaving a low first-mortgage rate completely untouched. During the draw period, they pay interest only on the amount actually borrowed.
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