A HELOC is an acronym which stands for Home Equity Line of Credit. A HELOC behaves just like a personal line of credit in that you may withdraw up to the amount approved for the HELOC. You repay only the amount you actually use. In general, a homebuyer will need at least 20% of equity in a home to obtain a HELOC.

The interest rate on a HELOC is variable based on an index, such as prime rate. This means that the interest rate can – and almost certainly will – change over time.