A Home Equity Line of Credit (HELOC) is a revolving second-lien credit facility secured by the equity in your home. Unlike a traditional lump-sum mortgage, a HELOC functions like a low-interest, collateralized credit card tied to the Wall Street Journal Prime Rate + Margin: you only pay interest on the exact dollar balance you actually draw.
A standard 30-year HELOC is divided into two distinct contractual phases: 1. The Draw Period (Typically Years 1–10): You can borrow, repay, and re-borrow up to your approved credit limit via wire transfer, checks, or card. Minimum monthly payments during the draw period are often interest-only. 2. The Repayment Period (Typically Years 11–30): At the end of Year 10, the credit line freezes (no further draws allowed), and any outstanding balance converts into a fully amortizing principal-plus-interest repayment schedule over the remaining 20 years.