A Home Equity Line of Credit, known as a HELOC, allows you to apply for a line of credit using your home as collateral. This can be useful for a variety of large expenses, from home improvement projects like kitchen remodels to college planning or even weddings.
While you might be able to secure a personal loan, a home equity loan or put these expenses on a credit card, you have other options. Learning more about how a home equity line of credit works and what you can use it for can help you make the right financial decisions to tackle a large project or cope with an unexpected expense.
A Home Equity Line of Credit (HELOC) is a type of second mortgage that allows you to borrow against the available equity in your home – the difference between your home’s current market value and the amount you still owe on your mortgage. Instead of borrowing a lump sum all at once, you secure a total line of credit that you can then borrow against as you need to. A home equity line of credit differs from an unsecured credit card in one important way; the HELOC is secured with the equity in your home.
Once approved, you’ll have access to a set credit limit during a designated draw period, typically lasting up to 10 years. During this time, you can use the funds as needed – whether you’re replacing an air conditioner, remodeling a bathroom or covering an unexpected expense – giving you the flexibility to manage large or unplanned costs on your own timeline.
Common Uses for a HELOC:
While both options use your home’s equity, they work differently:
Scenario | HELOC (Home Equity Line of Credit) | Home Equity Loan |
---|---|---|
You need flexibility over time | ✅ Borrow as needed, repay and reuse during the draw period | ❌ Fixed lump sum, no re-borrowing |
You’re unsure how much you’ll need | ✅ Only pay interest on what you use | ❌ Pay interest on the full amount, even if unused |
You want lower initial payments | ✅ Interest-only payments during draw period | ❌ Full principal + interest payments start immediately |
You’re planning a long-term project (e.g., home renovation) | ✅ Access funds in phases as the project progresses | ❌ Receive all funds upfront, regardless of timeline |
You want to keep your current mortgage | ✅ No need to refinance | ✅ No need to refinance |
You prefer predictable payments | ❌ Variable interest rate may fluctuate | ✅ Fixed rate and monthly payments |
You’re consolidating a known amount of debt | ⚠️ Possible, but less ideal | ✅ Best for one-time, fixed-cost needs |
At Seacoast Bank, we offer Home Equity Lines of Credit (HELOCs) because they provide flexibility and control to manage evolving financial needs. While we don’t offer home equity loans, we’re committed to helping you make informed financial decisions with honest, local guidance.
If you decide a HELOC is right for you, you can apply online now or make an appointment at a branch near you. A loan specialist will work with you to determine if this product is a good match for you. Some factors to take into consideration include your home’s appraised value, the amount of money you owe on your mortgage, your debt-to-income ratio and your credit score. Most lenders allow you to borrow up to 80% of your home’s appraised value (loan to value ratio), minus what you still owe.
Example:
When you are ready to apply, the process is faster than a mortgage and upon approval, you’ll be able to access the credit line your lender has extended. The terms and conditions vary; you may have a minimum or maximum withdrawal to adhere to when you make a purchase.
If interest rates are a concern, consider all of your options before applying. HELOCs typically come with variable interest rates, which means your rate (and monthly payment) can change over time as the market changes. When you withdraw money from your HELOC, you’ll receive monthly bills that include a minimum payment based on the principal and interest. Payments may change based on your balance and fluctuations of the interest rate.
To manage rate fluctuations, some lenders-including Seacoast-may offer a fixed rate HELOC option (also known as a HELOC Carve Out). This allows you to lock in a fixed rate on a portion of your balance, giving you predictable monthly payments. Minimum amounts are required and the initial rate may change based on market conditions.
Understanding how repayment works can help you plan ahead and avoid surprises. The draw period is the initial phase of your HELOC—typically around 10 years—when you can borrow funds as needed up to your maximum credit line amount. During this time, you usually only need to make interest payments on the amount you've borrowed, keeping your monthly payments relatively low. You can repay the principal at any time, but it's not required.
Once the draw period ends, your repayment terms will change depending on the type of HELOC you have:
It’s important to know your HELOC terms before borrowing allowing you to plan ahead to avoid financial stress.
One of the primary HELOC advantages is the built-in flexibility; once your credit limit is approved, you can use your HELOC as little or as often as you need to. A few other advantages include:
Like any financial instrument, a HELOC can present some risk to borrowers; it is important to have a complete understanding of the pros and cons before determining if a home equity line of credit is right for you. A few things to consider include:
A HELOC can be a powerful financial tool when used wisely. It offers flexibility, competitive rates and peace of mind knowing you have access to funds when you need them. But it’s important to understand the risks and ensure it aligns with your financial goals.
Ready to explore your options? If you are interested in a HELOC or would like to learn more, you can apply online now, make an appointment at a Seacoast Bank branch near you or speak with a Seacoast Banker for help in determining the ideal personal lending option to meet your needs.
Topics: Heloc, Smart Financing with Helocs
Are you interested in contacting a local, Florida banker to discuss your individual financial needs? We’d love to speak with you. Schedule a consultation today.
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