A HELOC — Home Equity Line of Credit — is a revolving credit facility secured by the equity in your home. It functions similarly to a credit card: you receive a maximum credit limit based on your equity, and you can borrow against it, repay, and borrow again during a specified draw period (typically 10 years). After the draw period ends, the repayment period begins (typically 10 to 20 years), during which you can no longer borrow and must pay back the outstanding balance. Learn more in our complete HELOC guide.
HELOC amounts are determined by the lender based on a percentage of your home's appraised value minus the outstanding mortgage balance. Most lenders allow you to borrow up to 80% to 85% of your home's value. For example, if your home is worth $500,000 and you owe $300,000 on your first mortgage, your available equity is $200,000. At 80% combined loan-to-value, the lender would approve a HELOC of up to $100,000 ($500,000 × 80% = $400,000, minus $300,000 existing mortgage = $100,000).
HELOCs typically carry variable interest rates tied to the prime rate plus a margin. When the Federal Reserve raises or lowers rates, your HELOC rate — and monthly payment — adjusts accordingly. Some lenders offer fixed-rate conversion options, allowing you to lock a portion of your balance at a fixed rate for a specified period. HELOCs are popular for home improvements, debt consolidation, education expenses, and emergency reserves because of their flexibility and typically lower rates compared to credit cards or personal loans.
From a title perspective, a HELOC creates a lien on the property — specifically a second mortgage lien that is subordinate to the first mortgage. This lien appears during the title search and must be addressed when the property is sold or refinanced. If you are selling a home with an existing HELOC, the outstanding balance (plus any outstanding draws) must be paid off at closing from the sale proceeds. The title company obtains a payoff statement from the HELOC lender and ensures the lien is released after payoff.
If you are refinancing your first mortgage while keeping your HELOC in place, a subordination agreement is required from the HELOC lender. This agreement keeps the HELOC in its junior position behind the new first mortgage. Without subordination, the HELOC would have priority over the new mortgage — something no first mortgage lender would accept. At Beycome Title, we coordinate subordination agreements as part of our refinance closing process. Use Beycome's home equity calculator to estimate your available equity, or get your free closing quote.