HELOC: Your House’s ATM — Use It, Don’t Abuse It

A Home Equity Line of Credit (HELOC) lets you borrow against the equity in your home, like a credit card you can tap as needed. It’s a flexible way to pull cash for renovations, debt consolidation, or big expenses, but it’s not free money—your house is on the line. Let’s break it down.

The Breakdown

A HELOC is a revolving line of credit secured by your home’s equity—the difference between your home’s value and what you owe on your mortgage. You’ll see limits based on combined loan-to-value (CLTV)—often 80%–85% of your home’s value minus what you still owe, not a percent of equity. You can borrow, repay, and borrow again during a “draw period” (usually 5–10 years). After that, you enter a repayment period (10–20 years) where you pay back what you borrowed plus interest.

Interest rates are usually variable, tied to the prime rate, and range from 7% to 10% as of 2025, per Bankrate data. For a $200,000 home with a $100,000 mortgage, an 85% CLTV lender caps total debt at $170,000; subtract your mortgage and your HELOC limit is ~$70,000. Draw $40,000 at 8%? Interest-only is ~$267/mo; once you amortize over 10 years, payment jumps to ~$485/mo.

Example: In 2023, the average HELOC balance was $42,139, per Experian. Variable rates mean payments can spike if rates rise, as they did in 2022–2023 when Fed hikes pushed the prime rate up, driving HELOC rates higher until recent easing. Default, and your lender can foreclose.

HELOCs surged in popularity post-2008 as home values climbed, letting homeowners tap rising equity. But variable rates are a risk—plan for hikes.

The Takeaway

A HELOC is a powerful tool if you’ve got discipline. Use it for high-value projects like home improvements, not frivolous spending. Shop around for low rates and fees, and plan for rate hikes. Check your equity and terms with your lender—don’t borrow more than you can repay, or you’re risking your home.

The Closer

A HELOC turns your house into an ATM, but overspend, and you’re sleeping on the street.

Disclaimer: This is not financial advice. Consult a professional before making borrowing or investment decisions. For more insights, subscribe to my newsletter. Explore HELOC options with your lender/servicer tools.