Equity you can draw on. A first mortgage you keep.
A home equity line of credit sits behind your existing mortgage and lets you borrow, repay and borrow again during the draw period. If your first mortgage has a rate you will not see again, a HELOC is how you use your equity without giving that rate up.
- Structure
- Revolving credit line with a draw period and a repayment period
- First mortgage
- Unchanged
- Rate
- Typically variable, tied to an index
- Self-employed
- Bank-statement HELOC available
How it works
A home equity line of credit is a second mortgage structured as a revolving line. You are approved for a maximum, you draw what you need when you need it, and you pay interest only on what you have drawn. During the draw period you can repay and draw again. After it, the balance converts to a repayment schedule.
Because the HELOC is a separate loan, your first mortgage stays exactly as it is. For owners with a low-rate first mortgage, that makes a HELOC far cheaper than a cash-out refinance that would reset the whole balance at today's rate.
HELOC rates are usually variable, so the payment can change. That suits phased spending, a reserve for the unexpected, or a balance you plan to repay within a few years. For a single large cost you want fixed, a fixed-rate second mortgage is the alternative, and Troy prices both.
- Owners with a low-rate first mortgage who want to leave it alone
- Renovations done in phases, where the draws match the work
- A standing reserve for the unexpected that costs nothing until used
- Tuition or other costs paid over time
- Self-employed owners using bank-statement qualifying
Not sure you fit? Ask. Troy tells people on the first call when a different program serves them better.
What to consider
Program details vary by investor and change over time. These are the questions that decide whether the loan is right for you; Troy confirms the specifics for your file.
Variable rate
Most HELOCs adjust with an index. Understand the margin, the caps and what the payment becomes if rates rise.
Draw period, then repayment
Interest-only or minimum payments during the draw period give way to full amortization after it. Plan for the step up.
Combined loan-to-value
The line is sized on your home's value minus the first mortgage, up to the program's combined limit. The appraisal or valuation sets the number.
Fees and minimum draws
Some programs charge annual fees or require an initial draw. Troy reads the fine print with you.
The process
From the first conversation to funding, you deal with Troy.
Talk with Troy
Your home's value, your first mortgage and what you want the line for.
Size the line
Combined loan-to-value, credit and income or bank statements set the maximum. You get it in writing.
Valuation and approval
An appraisal or automated valuation establishes value. Troy clears conditions personally.
Open the line
Sign, wait out the rescission period if the home is your primary residence, then draw as you need.
Questions people ask
General answers. The answer for your file comes from a conversation with Troy, not from a web page.
HELOC or cash-out refinance?
If your first mortgage rate is lower than today's rates, a HELOC usually wins because it leaves that loan untouched. If your first mortgage rate is high, a cash-out refinance may improve both. Troy shows the total cost of each.
Is the interest tax-deductible?
Interest on home-equity debt used to buy, build or substantially improve the home may be deductible under current rules, with limits. Ask your tax advisor about your situation.
Can I get a HELOC if I am self-employed?
Yes. Bank-statement HELOC programs qualify on deposits instead of tax returns.
What is the difference between a HELOC and a fixed second?
A HELOC is a revolving line with a variable rate; a fixed second is a lump sum with a fixed rate and payment. The comparison on this page shows which suits which purpose.
Related programs
Often considered alongside this one. Troy prices the alternatives so you can see them side by side.
Fixed second
A lump sum behind your first mortgage with a fixed rate and a fixed payment for a set term.
Debt consolidation
Replace high-rate consumer debt with one fixed payment, with the risks of securing it against your home explained first.
Refinance
Lower the payment, shorten the term or take cash out, with the before-and-after on the table before you decide.
Bank statement
Self-employed income documented with 12 or 24 months of deposits instead of tax returns.
Talk it through with Troy.
No obligation and no credit pull on the first call. Tell him what you’re trying to do and he’ll tell you whether heloc financing is the right tool, and what it would cost.