Home Equity Lines of Credit

How a credit line works

A HELOC permits draws up to an approved limit during a defined draw period. Amounts repaid may become available to borrow again under the agreement. After the draw period, borrowing ends and repayment requirements can change.

HELOC rates are commonly variable. Ask how the index, margin, caps and minimum payments work, and calculate the payment at a higher rate as well as at the starting rate.

Equity is only the starting point

The value of the property minus existing liens is equity; it is not automatically the amount available to borrow. A lender also evaluates combined leverage, occupancy, income, credit and the first mortgage. For an open line, the full credit limit may count in the leverage calculation.

A primary residence and a rental property may follow different programs. Confirm the offered lien position, approved occupancy and documentation method in a current written proposal.

Compare the alternatives before choosing

A closed-end second provides a defined amount with a separate repayment schedule. A cash-out refinance replaces the first mortgage. A revolving line is more flexible for staggered costs, but its payment changes deserve careful planning.

TQL can review your property and equity objective and compare applicable options. Line limits, draw terms and pricing must be confirmed for the actual product; first-lien DSCR limits do not establish HELOC terms.

What to bring to an equity conversation

Identify the work or investment the funds will support and whether the amount is fixed or uncertain.

• Property address, occupancy and estimated value.
• Current statements for all mortgages and equity lines.
• Requested amount, draw timing and intended use.
• Income documents and a budget for combined payments.