HELOC rates today remain steadily under 9%. The next significant move lower for home equity line of credit interest rates could come if the Federal Reserve lowers short-term interest rates at its meeting in three weeks.

Dig deeper: Is now a good time to take out a HELOC?

According to Bank of America, the largest HELOC lender in the country, today's average APR on a 10-year draw HELOC remains 8.72%. That is a variable rate that kicks in after a six-month introductory APR, which is 6.49% in most parts of the country.

The lowest HELOC rate reported was 8.05%, with the maximum 9.59%.

Homeowners have a sizable amount of value tied up in their houses — more than $34 trillion at the end of 2024, according to the Federal Reserve. That's the third-largest amount of home equity on record.

With mortgage rates lingering in the high 6% range, homeowners are not likely to let go of their primary mortgage anytime soon, so selling the house may not be an option. Why let go of your 5%, 4% — or even 3% mortgage?

Accessing some of the value locked into your house with a use-it-as-you-need-it HELOC can be an excellent alternative.

HELOC interest rates are different from primary mortgage rates. Second mortgage rates are based on an index rate plus a margin. That index is often the prime rate, which today is 7.50%. If a lender added 1% as a margin, the HELOC would have a rate of 8.50%.

Lenders have flexibility with pricing on a second mortgage product, such as a HELOC or home equity loan, so it pays to shop around. Your rate will depend on your credit score, the amount of debt you carry, and the amount of your credit line compared to the value of your home.

And average national HELOC rates can include "introductory" rates that may only last for six months or one year. After that, your interest rate will become adjustable, likely beginning at a substantially higher rate.

You don't have to give up your low-rate mortgage to access the equity in your home. Keep your primary mortgage and consider a second mortgage, such as a home equity line of credit.

The best HELOC lenders offer low fees, a fixed-rate option, and generous credit lines. A HELOC allows you to easily use your home equity in any way and in any amount you choose, up to your credit line limit. Pull some out; pay it back. Repeat.

Meanwhile, you're paying down your low-interest-rate primary mortgage like the wealth-building machine you are.

Today, FourLeaf Credit Union is offering a HELOC rate of 6.49% for 12 months on lines up to $500,000. That's an introductory rate that will convert to a variable rate later. When shopping lenders, be aware of both rates. And as always, compare fees, repayment terms, and the minimum draw amount. The draw is the amount of money a lender requires you to initially take from your equity.

The power of a HELOC is tapping only what you need and leaving some of your line of credit available for future needs. You don't pay interest on what you don't borrow.

Rates vary so much from one lender to the next that it's hard to pin down a magic number. You may see rates from nearly 7% to as much as 18%. It really depends on your creditworthiness and how diligent a shopper you are.

For homeowners with low primary mortgage rates and a chunk of equity in their house, it's probably one of the best times to get a HELOC. You don't give up that great mortgage rate, and you can use the cash drawn from your equity for things like home improvements, repairs, and upgrades. Of course, you can use a HELOC for fun things too, like a vacation — if you have the discipline to pay it off promptly. A vacation is likely not worth taking on long-term debt.

If you take out the full $50,000 from a line of credit on a $400,000 home, your payment may be around $395 per month with a variable interest rate beginning at 8.75%. That's for a HELOC with a 10-year draw period and a 20-year repayment period. That sounds good, but remember, it winds up being a 30-year loan. HELOCs are best if you borrow and pay back the balance in a much shorter period of time.

There are several ways to turn your home equity into cash. One of the most popular? That’d be a home equity line of credit — or HELOC. Despite their popularity, HELOCs aren’t like your average loan product. No lump sum of cash gets handed over, and you usually won’t owe huge monthly payments right after closing on your loan.

Instead, you’ll go through two distinct periods: The draw period and the repayment period. Monthly payments during the repayment period are similar to other types of loans, but the draw period is what makes a HELOC unique. Here’s how the draw period works.

Learn more: 7 ways to build equity in your home

In this article:

What is a HELOC draw period?

How HELOC draw periods work

Payments during the draw period

HELOC draw period vs. repayment period

Preparing for your HELOC draw period to end

FAQs

A HELOC “draw period” is when you can withdraw money from your credit line. A 10-year draw period is pretty standard, but the exact length can vary by the HELOC lender.

HELOCs are sort of like credit cards. Once approved for one, you’ll have access to a hefty line of credit. You can pull money from that credit line as needed — usually using a particular card or checkbook — but only for as long as the draw period lasts.

So, if your draw period is 10 years, you have a decade to withdraw cash from your credit line. This can be helpful if you have an extended project you need to finance (maybe a large-scale renovation at your house), and you’re not sure how much you’ll need to borrow. It can also make HELOCs a smart financial safety net since they give you long-term access to funds in a pinch.

Read more: Is a HELOC a good idea? Here are the pros and cons.

While in the draw period, you usually only need to pay interest on the money you’ve taken out of your HELOC fund — you don’t need to repay the principal yet. Let’s say you have a HELOC for $30,000 with an 8% interest rate and start by withdrawing $1,000. You’ll only pay the interest on the $1,000 throughout the draw period (unless you take out more later, then you’ll pay interest on the larger amount).

You have the option to pay more than that, though, if you like. For example, you might opt to repay that full $1,000 if you can comfortably afford to do so. That would then replenish your credit line to $30,000, and you could borrow that $1,000 again later — as long as you’re still in the draw period.

In some cases, a HELOC may come with a minimum monthly payment that covers interest and a small portion of principal during the draw period. The exact arrangement depends on the lender, though.

Dig deeper: What is an interest-only HELOC, and how does it work?

It’s common for HELOCs to have 30-year terms. Once your 10-year draw period comes to a close, you’ll enter what’s called the “repayment period.” This is when you’ll start making full principal and interest payments to your lender. On most HELOCs, the repayment period lasts for 20 years.

The amount you’ll pay per month will depend on how much you’ve withdrawn from your HELOC, as well as what your interest rate is. As you get closer to this point in your term, you can use a HELOC payment calculator to estimate your monthly payments.

In rare occurrences, you may owe the full balance in one lump sum once your draw period ends. This is called a balloon payment.

Read more: How to get a HELOC in 6 simple steps

As the end of your HELOC draw period approaches, you’ll need to have a plan for repaying the balance.

This might mean readjusting your budget to make room for your estimated monthly payments, or you may want to explore other options. For example, you could do a cash-out refinance on your original mortgage and use the cash to pay off your HELOC balance. Just make sure the numbers work in your favor. (Refinancing means replacing your initial mortgage term and rate entirely. If that would mean losing an ultra-low mortgage rate, it may not be worth it.)

Taking out a new HELOC or home equity loan could also work. You’d simply use the funds from the new loan to pay off your existing balance. This may seem counterintuitive, but if you’re having trouble affording payments on your current HELOC, either of these second mortgages will give you the money to repay the principal.

If you get a new HELOC, you can use the 10-year draw period to work on improving your personal finances so you’re more prepared for the next repayment period. With a home equity loan, you’ll probably have 30 years to repay the principal rather than 20 years, resulting in lower monthly payments that could be easier to fit into your budget.

If you’re not sure of the right way to handle your HELOC payments, talk to a mortgage professional or financial advisor. They can help you make the right plan for your finances.

Learn more:

HELOC vs. cash-out refinance

HELOC vs. home equity loan

With most HELOCs, you have 10 years to withdraw money from your HELOC (called the “draw period”). Typically, you will make interest-only payments during this time. Once the draw period ends, you then have 20 years after that to repay the full balance plus interest.

When your HELOC draw period ends, you’ll start making full principal and interest payments to your mortgage lender. You usually have 20 years to pay off the balance.

During a HELOC’s draw period, you’ll usually only pay interest on the money you withdraw. You can pay more than this if you’d like, but it is not required. Regular monthly payments toward the principal and interest are not mandatory until the repayment period, which usually starts 10 years into the HELOC’s term.

Although fixed-rate HELOCs exist, these second mortgages usually have variable interest rates. The answer to how often the rate changes depends on the terms of your HELOC, but generally speaking, your HELOC rate can be adjusted monthly based on the index rate it’s linked to. This could mean a higher or lower monthly payment as a result.

You can certainly pay off your HELOC during the draw period, but you’re not required to. During the draw period, most lenders only require you to make interest payments. Once you enter the repayment period, that’s when monthly payments toward both the principal and interest will begin.

This article was edited by Laura Grace Tarpley.

Are you overwhelmed by credit cards, personal loans, or medical bills? Depending on your financial situation, using a home equity line of credit (HELOC) to pay off debt could be a smart move.

However, it’s crucial to understand how paying off or consolidating debt with a HELOC works to decide if it makes sense for you.

A HELOC is a line of credit drawn from the equity in your home. It functions like a credit card with a revolving line of credit, unlike a traditional mortgage or personal loan, which gives you a lump sum of money. A HELOC gives you access to money for just about anything, such as large purchases, home improvements, or debt consolidation.

Most HELOCs have variable interest rates, although some lenders offer fixed-rate HELOC options. HELOC annual percentage rates (APRs) are typically much lower than credit card rates. So, while they have some of the same features as a credit card, they can be more affordable and actually help you pay off credit card debt.

To pay off debt with a HELOC, you need to understand how to qualify and what rules you have to follow. Here are the basics on getting a HELOC and using the funds to pay off other debts.

HELOC lenders typically look for homeowners with 15% to 20% equity in their house. Equity is your home’s value minus your outstanding mortgage balance. That means you’re more likely to get approved if your mortgage balance is 80% to 85% less than your home’s appraised value. For example, if an appraiser claims your home is worth $400,000, your outstanding mortgage principal should be a maximum of $320,000 to $340,000. If your balance is higher, you won’t qualify for a HELOC.

You’ll also need to meet basic borrower requirements, such as having a good credit score, a low debt-to-income ratio, stable income, and a history of on-time payments.

Read more: How to get a HELOC with bad credit

There are two main phases of a HELOC.

The draw period: You can access as much or as little of the line of credit the lender approved you for during the draw period, which usually lasts up to 10 years. During this time, you’re typically required to make minimum interest-only payments on the amount you withdraw (though you can pay more). During this period, you can draw money as needed to pay off medical debt, credit card bills, or other significant debt payments.

The repayment period: In the repayment period, your minimum payment will increase to cover both interest and principal until you’ve paid off the balance. The repayment period usually lasts for 20 years, and you can no longer draw money during this time.

HELOCs are secured loans that use your home as collateral. Secured loans are considered less risky for lenders because if a borrower can’t repay the debt, the lender can seize the home.

Secured loans can be riskier for borrowers, though. If you struggle to afford monthly payments on both your HELOC and original mortgage, your home could go into foreclosure. So, while a HELOC can help you get out of debt, only consider this option if you’re confident you can keep up with the loan payments. You don’t want to lose your house in an attempt to pay off unsecured debt, such as a credit card or personal loan.

There are several benefits to a HELOC, especially if you’re dealing with high-interest debt. Here are a few pros to consider.

Lower interest rates: HELOC interest rates can be lower than those for credit cards or other unsecured loans, like personal loans. Using a lower-interest line of credit to pay off higher-interest debt will save you money on interest payments.

Affordable payments: For the first decade or so, you can typically make interest-only payments on your HELOC. This can be more affordable than the minimum payments for other borrowing methods.

May improve credit utilization: Credit utilization refers to the percentage of your available credit you’re using. The lower your utilization ratio, the better. For example, it’s better for your credit score if you owe $1,000 on your credit card with a $10,000 limit than if you owe $9,000. The FICO credit score model doesn’t usually include HELOCs when calculating credit utilization. (However, other scoring models might.)

Streamlined payments: Simplifying from multiple credit card payments to one HELOC payment could make it easier to manage your finances.

Before using a HELOC to pay off other loans, consider these potential downsides.

Requires enough home equity: You may have a hard time qualifying for a HELOC if you don’t have at least 15% equity in your home.

May come with closing costs: If the lender charges HELOC closing costs, you could pay 2% to 5% of the credit limit.

Variable interest rates: Repaying a variable-rate HELOC can be difficult to budget since the payment can change periodically.

Defaulting can risk home foreclosure: Your home is collateral with a HELOC, so if you have trouble repaying, the lender can repossess your home. There can be consequences for not repaying your credit card, personal loan, or student loan bills, but because these are types of unsecured debt, companies cannot take away things like your home.

Lower interest rates are one of the biggest advantages of a HELOC, making it a solid option for people with high-interest debt.

“Anytime you can consolidate debt by rolling into a loan with a lower interest rate, it can put you in a better financial position,” said Dre Torres, loan officer at Cornerstone First Mortgage, via email. “Savings from a HELOC can help you have a positive monthly cash flow or pay down other debts.”

However, struggling to repay a HELOC has serious consequences.

“A HELOC is tied to your home, so it’s not something you want to take lightly. Make sure you are financially diligent and don’t get back into debt,” noted Torres. “If you lack a solid budget or have poor spending habits, a HELOC is generally a bad idea."

There are other ways to consolidate debt if a HELOC is not right for you.

Home equity loan: Access your home’s equity in a lump sum, typically repaid at a fixed interest rate.

Cash-out refinance: Refinance for more than your existing mortgage if you have enough equity. Take the difference in cash and use it to pay off debt.

Personal loan: You can borrow a lump sum to consolidate or pay off higher-interest debt and repay it at a fixed rate, usually within five to seven years.

Credit card balance transfer: Transferring high-interest debt to a credit card with 0% APR could save you money if you can pay off the balance before the no-interest period ends. You typically need good to excellent credit to qualify.

Credit counseling programs: Some nonprofit agencies can help you negotiate more affordable payments with your creditors if you’re struggling to stay current.

Read more: HELOC vs. home equity loan — Choose the right one for you

It can be a good idea to use a HELOC to repay debt if you have high-interest credit card debt. HELOCs tend to have lower rates than credit cards because they’re secured by your home. But that also means you could lose your home if you struggle to repay the balance.

A HELOC typically shows up on your credit report as revolving credit. As with other credit accounts, missing payments can hurt your score. A HELOC can also impact your credit utilization. While FICO doesn’t include a HELOC in your utilization calculation, other credit score models might.

You can use a HELOC or home equity loan to pay off high-interest debt. Both use your home as collateral. HELOCs usually come with variable interest rates. Home equity loans have fixed rates, making them more predictable. Your HELOC payments could be more affordable if you choose interest-only payments during the draw period. However, your payments will increase significantly when the draw period ends.

Laura Grace Tarpley edited this article.

If you need access to cash and have gained a significant chunk of equity in your home, you’re in luck: You can use a home equity line of credit (HELOC) to tap your equity and use the money to pay for whatever you want, from home improvements to college courses.

However, you must meet specific criteria to get approved for a HELOC. Here’s what to know about how to qualify and apply for a HELOC.

In this article:

What is a HELOC, and how does it work?

HELOC requirements

How to get a HELOC: Step-by-step

How long does it take to get a HELOC?

FAQs

A HELOC, or home equity line of credit, is a type of second mortgage, so you’ll have your first mortgage and HELOC simultaneously. It’s a revolving form of credit that lets you borrow against the equity in your home. Equity is the difference between your house’s current market value and the amount you owe on your original mortgage.

A HELOC functions similarly to a credit card. You can access as much or as little money as you need, up to a certain limit. However, unlike a credit card, HELOCs use your home as collateral, which means you could risk foreclosure if you fail to make monthly payments.

A HELOC has two distinct phases: the draw period and the repayment period.

The draw period. The draw period typically lasts 10 years. You can make withdrawals from your line of credit during the draw period as needed. Each HELOC lender works differently, but you’re often required to make monthly interest payments during the draw period.

The repayment period. Once the draw period ends, your HELOC will transition into the repayment period, commonly lasting up to 20 years. During this timeframe, you’re not allowed to withdraw any more funds, and you’ll have to start making payments toward both the principal and interest.

Dig deeper: What can you use a HELOC for? 7 ways homeowners use the funds.

Not every homeowner qualifies for a HELOC. Here are the requirements you’ll have to meet to take out a home equity line of credit:

Home equity. Most lenders will require you to have accumulated at least 15% to 20% equity to be eligible for a HELOC.

Credit score. Credit score requirements vary by lender. However, you typically need at least a 680 FICO score to be eligible.

Debt-to-income ratio (DTI): Your DTI ratio divides your total monthly debt obligations by your monthly gross income and expresses it as a percentage. Lenders generally like to see a DTI ratio of 43% or less for HELOC applicants.

Proof of income. Though there’s no universal minimum income requirement for HELOCs, lenders will still require income verification to confirm you’re financially stable enough to repay the line of credit. They may want to see your pay stubs, W-2s, and tax returns to verify your income.

Homeowners insurance. Since your HELOC is secured by your home, lenders have a financial stake in it. They’ll require proof that you have homeowners insurance to cover the property in case of unexpected events, like a fire or burglary, to protect their investment.

Learn more: 7 ways to build equity in your home

Getting a HELOC is pretty straightforward. Here’s a quick step-by-step guide on how to get started.

Before applying for a HELOC, make sure you’re financially able to take on additional debt and that your credit score is high enough to qualify.

If you don’t know where you stand in terms of your credit health, you can get free weekly credit reports from the three credit bureaus: Experian, Equifax, and TransUnion. You may also want to talk to a financial advisor or counselor to help decide if a HELOC makes sense for your financial situation.

Read more: Is now a good time to take out a HELOC?

You can find HELOCs at most financial institutions that offer home loans, from your local bank to national lenders. But don’t just go with the first one you see. Compare terms, rates, eligibility requirements, and closing costs from at least three mortgage lenders to find the best HELOC lender for your situation.

Once you’ve found a lender you want to work with, it’s time to gather and organize all the documents you’ll need to complete the application. Lenders may ask you to provide information such as proof of income, a recent mortgage statement, a government-issued photo ID, and proof of homeowners insurance. Check your mortgage lender’s website for more details.

Next, fill out the application using the information you’ve gathered above. Some banks and credit unions allow you to apply online or over the phone, while others may require you to do it in person.

In the underwriting process, the mortgage lender verifies your financial information, evaluates your home’s value, and assesses your ability to repay the HELOC.

Depending on your lender, the underwriting process can take several weeks. During underwriting, your lender may also order a home appraisal to determine your home’s market value.

If your application is approved, you’ll close on the HELOC, sign the final paperwork, and agree to your line of credit terms. Your lender will outline your credit limit, repayment schedule, and interest rate.

Make sure you understand everything before signing on the dotted line. Once everything is finalized, you’ll receive instructions on how to access your money.

Read more: Is taking out a HELOC a good idea?

If you’re thinking about taking out a HELOC, you may be wondering how long it takes to get a HELOC approved. The short answer: around two to six weeks.

But the timeframe could also vary depending on the lender’s processing time and how quickly you can provide your lender with the required information and documents. If you’re in a time crunch, you can speed up your HELOC application process by shopping for lenders that offer faster processing times and having your paperwork organized and ready to go.

Dig deeper: What documents do I need for mortgage preapproval?

Getting a HELOC with bad credit may be difficult since most lenders require a credit score of at least 680 to qualify. However, some lenders may allow you to take out a HELOC with a lower credit score if you have a lot of equity in your home or earn a high income.

Getting a HELOC should be relatively easy as long as you meet the eligibility requirements, such as having enough equity in your home and a good credit score.

Yes, but you’re usually only required to make interest payments during the HELOC draw period. Once the draw period ends and you enter the repayment period, you must start making monthly payments on both the principal and interest.

Though there isn’t a standard income requirement for HELOCs, most mortgage lenders will want you to have a DTI of 43% or lower. Your monthly gross income should be high enough to cover your total debt comfortably.

This article was edited by Laura Grace Tarpley.