HELOC

HELOC stands for Home Equity Line of Credit. It's a revolving credit line secured by your home's equity — like a credit card backed by real estate, with significantly lower rates and substantially higher limits.

For homeowners and investors with built-up equity, a HELOC is the most flexible way to access that capital without selling the property or refinancing the existing mortgage. Draw what you need, when you need it. Pay interest only on the balance you actually use.

How a HELOC works

A HELOC operates in two phases:

1. Draw period (typically 10 years). You can borrow against the line at any time, up to your approved limit. Most HELOCs require interest-only payments during this phase. You can pay down principal voluntarily and re-borrow it.

2. Repayment period (typically 20 years). The line closes to new draws. Your outstanding balance amortizes over the repayment period with full principal + interest payments.

HELOCs are typically variable-rate, tied to the Prime rate. Some lenders offer fixed-rate options or hybrid lock features for portions of your balance.

HELOC vs. Cash-Out Refinance

Both pull equity out of your home, but they work differently:

• Cash-out refinance: Replaces your existing mortgage with a new, larger one. Lump-sum disbursement at closing. Fixed rate. Resets your mortgage term.
• HELOC: Sits on top of your existing mortgage as a second lien. Revolving access. Variable rate. Doesn't disturb your first mortgage's terms.

If your existing mortgage rate is favorable (locked at 4-5%), a HELOC preserves it. If you need a one-time lump sum and don't want a separate payment, cash-out refinance may be cleaner.

What HELOCs are used for

Investment property down payments. Tap your primary residence's equity to fund an investment property purchase. Your HELOC funds become the down payment + closing on the new acquisition.

BRRRR acquisition + rehab. Use HELOC funds for the cash-buy phase of a BRRRR. Refinance into a long-term DSCR loan at the end, then pay back the HELOC.

Debt consolidation. Pay off high-interest credit card debt at HELOC rates (typically Prime + 0-2% vs. 18-25% on cards).

Home renovation. Fund kitchen remodels, additions, or full renovations — and potentially increase the home's value, recovering some of the cost through appreciation.

Emergency reserve. Open a line before you need it. Pay nothing until you draw. Acts as a financial safety net at near-zero opportunity cost.

What investors look for in a HELOC

• Maximum CLTV: The combined loan-to-value (existing mortgage + HELOC) the lender will allow. Standard programs cap at 80-85%; aggressive programs go to 90%.
• Approval speed: Most lenders take 30-45 days. Fast programs close in 5-10 business days.
• Investment property eligibility: Most banks won't HELOC investment properties. Specialty lenders will, typically at lower CLTV (70-75%) and higher rates.
• Closing costs: Some HELOCs have low or no closing costs; others charge 2-5% origination.

Rate Hero's HELOC program

Rate Hero offers HELOCs up to 90% CLTV — significantly higher leverage than most banks (which cap at 80-85%). Closing in as little as 5 business days. Available on primary residences, second homes, and investment properties. Variable and fixed-rate options.

This matters most for investors with substantial equity and active deal flow. The difference between 80% CLTV and 90% CLTV on a $700K home with a $300K mortgage is $70,000 of additional accessible equity — often the difference between making the next deal and waiting another year.

If you're sitting on equity and ready to deploy it, we can run the numbers in 5 minutes.