American homeowners are sitting on a record $32 trillion in home equity in 2026. A HELOC (Home Equity Line of Credit) lets you access that equity flexibly — but the variable rate structure creates risks that many borrowers underestimate.
How a HELOC works
A HELOC is a revolving line of credit secured by your home equity. Two phases:
- Draw period (typically 10 years): Access funds up to your credit limit. Pay interest-only on the amount drawn. Rate is variable (typically Prime + 0.5–2%).
- Repayment period (typically 20 years): No new draws. Repay principal + interest on outstanding balance. Payment increases significantly.
2026 HELOC rates
| Credit score | LTV | Rate range (2026) |
|---|---|---|
| 760+ | Under 80% | 7.5–8.5% |
| 720–759 | 80–85% | 8.5–9.5% |
| 680–719 | 85–90% | 9.5–11% |
HELOC vs home equity loan
| HELOC | Home Equity Loan | |
|---|---|---|
| Rate | Variable | Fixed |
| Access | Revolving line | Lump sum |
| Best for | Ongoing expenses, renovation in phases | One-time large expense |
| Payment certainty | Low (variable) | High (fixed) |
When a HELOC makes sense
- Home renovation that increases property value (kitchen, bathroom, addition)
- Emergency fund backstop for large predictable expenses
- Debt consolidation from higher-rate unsecured debt (with strong discipline)
When it doesn't
- Vacations, cars, or discretionary spending — you're converting unsecured consumer debt to secured home debt
- If your income is unstable — rising payments + job loss = foreclosure risk
- If you plan to move within 3 years — closing costs + fees may not be worth it
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