Tap Into Your Home's Equity With A HELOC

Understanding Home Equity Lines of Credit

A HELOC functions similarly to a credit card, providing a revolving line of credit secured by your home's equity. Equity represents the difference between your home's current market value and what you still owe on your mortgage. If your home is worth $400,000 and your mortgage balance is $250,000, you have $150,000 in equity. Most lenders allow borrowing up to 80% to 85% of your home's value minus your mortgage balance, though some extend to 90% for well-qualified borrowers.

HELOCs typically consist of two phases. The draw period, usually lasting 10 years, allows you to borrow funds as needed up to your credit limit. During this time, you often make interest-only payments on the amount you have drawn. The repayment period follows, typically spanning 20 years, during which you can no longer draw funds and must pay both principal and interest on your outstanding balance.

Interest rates on HELOCs are usually variable, meaning they fluctuate based on the prime rate, which is tied to Federal Reserve policy. When the Fed raises rates, your HELOC rate increases, and vice versa. Some lenders offer fixed-rate options or the ability to convert portions of your balance to fixed rates, providing payment predictability for borrowers concerned about rate volatility.

Why Choose a HELOC Over Other Options

Several factors make HELOCs attractive compared to alternative financing options. Interest rates typically run significantly lower than credit cards, often by two-thirds or more. A HELOC charging 8% APR provides substantial savings compared to credit cards averaging 20% or higher. This rate advantage makes HELOCs particularly effective for debt consolidation, where replacing high-interest balances with lower-rate home equity borrowing can save thousands in interest charges.

Flexibility distinguishes HELOCs from lump-sum home equity loans. Rather than borrowing a fixed amount upfront, you draw funds as needed during the draw period. This structure works well for ongoing projects like home renovations where total costs may be uncertain, or for situations where expenses will occur over time rather than all at once.

Interest on HELOCs used for home improvements may be tax-deductible, though tax laws have changed and you should consult a tax advisor regarding your specific situation. This potential deduction adds value beyond the lower interest rate, further reducing the effective cost of borrowing.

Compared to cash-out refinancing, HELOCs allow you to keep your existing mortgage intact. If you locked in a low mortgage rate during previous years, refinancing would mean giving up that rate in exchange for current, likely higher, rates on your entire mortgage balance. A HELOC lets you access equity without disturbing your primary mortgage terms.

Top HELOC Lenders to Consider

Multiple lenders offer competitive HELOC products with varying features, rates, and requirements. Understanding the options helps you identify the best fit for your needs when you apply for HELOC online.

Figure

Figure has established itself as the number one non-bank HELOC lender in the United States. The Figure home equity loan and HELOC products stand out for their entirely digital application process and rapid funding timeline. Borrowers can complete applications in as little as five minutes, with funding available in as few as five business days for loans under $400,000.

The Figure home equity loan operates somewhat differently than traditional HELOCs. Figure requires you to draw the entire credit line amount at closing, and you begin repayment immediately. As you pay down the balance, you can redraw funds up to 100% of what you have repaid during the draw period. Draw periods vary by term length, ranging from two years for five-year terms to five years for 30-year terms.

Figure offers fixed-rate options so you always know your payment amount, along with variable-rate choices for borrowers who prefer flexibility. Loan amounts range from $15,000 to $750,000 depending on your equity and qualifications. The lender uses automated valuation models instead of in-person appraisals for most properties, speeding the approval process significantly.

Credit requirements at Figure tend toward the higher end, with the best rates available to borrowers with excellent credit scores of 740 or above. The minimum credit score typically starts around 620 to 680 depending on your situation. Origination fees can reach up to 4.99%, which is higher than some competitors but may be offset by the speed and convenience of the fully online process.

U.S. Bank

U.S. Bank offers a comprehensive US Bank HELOC product with competitive rates and flexible features. Current variable rates for the US Bank HELOC range from 7.20% APR to 10.85% APR depending on credit profile, loan-to-value ratio, and whether you hold a U.S. Bank checking account.

The US Bank HELOC includes no application fees or closing costs, making it cost-effective for borrowers who want to avoid upfront expenses. A 0.50% rate discount is available when you maintain a U.S. Bank personal checking account and set up automatic payments, further improving the value proposition.

U.S. Bank provides the option to lock in fixed interest rates for up to 20 years on some or all of the money you borrow during your draw period. This feature adds predictability to your monthly budget without sacrificing the flexibility of a HELOC structure. The standard draw period lasts 10 years, followed by a 20-year repayment period.

To qualify for a US Bank HELOC, you need a FICO score of at least 660. Higher scores and lower loan-to-value ratios earn better rates. The bank prequalifies applicants without affecting credit scores, letting you see potential terms before committing to a full application.

Rocket Mortgage

Rocket Mortgage ranks as the largest mortgage lender in the United States and offers home equity products for homeowners seeking to access their equity. While the Rocket Mortgage home equity loan is available nationwide, it is important to note that Rocket Mortgage does not currently offer HELOCs. Instead, the Rocket Mortgage home equity loan provides a lump-sum borrowing option with fixed rates and predictable payments.

The HELOC Rocket Mortgage alternative, their home equity loan, allows borrowing from $45,000 to $500,000 ($61,000 minimum in Iowa) with 10-year or 20-year term options. Rocket clients save an average of $535 per month when consolidating debt using their home equity, according to company data.

Credit requirements for the Rocket Mortgage home equity loan are tiered based on how much equity you want to access. A 680 minimum FICO score allows borrowing up to 80% of your home's value, 700 enables up to 85%, and 740 or higher qualifies for up to 90% loan-to-value. Maximum debt-to-income ratio is 50%.

Rocket's all-digital application process appeals to tech-savvy borrowers who prefer handling financial transactions online. The company consistently earns top ratings for customer service, ranking first in J.D. Power's mortgage servicing satisfaction study. While the HELOC Rocket Mortgage option does not exist, their home equity loan provides an alternative worth considering if you prefer lump-sum borrowing over a revolving credit line.

Bank of America

Bank of America offers HELOCs with competitive rates and the ability to borrow up to 85% of your home's value minus your mortgage balance. The bank charges no application fees, closing costs, or annual fees, keeping upfront costs minimal.

Bank of America HELOC borrowers can convert $5,000 or more of their variable-rate balance to a fixed rate at any time, protecting against rising interest rates while maintaining access to remaining credit at variable rates. Preferred Rewards members receive additional rate discounts based on their rewards tier.

The standard HELOC structure includes a 10-year draw period with interest-only payments, followed by a 20-year repayment period. You can access funds through online transfers, a linked credit card, or checks. The bank's extensive branch network provides in-person support for borrowers who prefer face-to-face assistance alongside digital capabilities.

Navy Federal Credit Union

Navy Federal Credit Union serves military members, veterans, and their families with highly competitive HELOC products. Variable rates start as low as 7.00% APR for well-qualified borrowers, with rates based on credit score, loan-to-value ratio, and loan amount.

Navy Federal pays all closing costs on HELOC applications, including settlement fees, credit reports, flood determinations, property valuations, title searches, lender's title insurance, and recording fees. This policy eliminates a significant expense that other lenders may pass to borrowers.

The credit union charges no application, origination, annual, or inactivity fees. A Home Equity Line Platinum Credit Card provides convenient access to funds for purchases. Members can borrow up to their credit limit during the draw period, with flexible repayment options including interest-only payments during the initial phase.

Truist

Truist offers HELOCs in multiple states across the Southeast and Mid-Atlantic regions. The bank emphasizes quick application processing with dedicated loan officers available to answer questions throughout the process.

Truist HELOC borrowers can choose between variable and fixed rates, with fixed-rate options available for 60, 120, 180, or 240-month repayment terms. A $15 service fee applies to each fixed-rate advance. The flexibility to convert portions of your balance to fixed rates while keeping the remainder variable allows customized payment strategies.

Closing costs can either be paid upfront or advanced by Truist, giving borrowers flexibility in managing initial expenses. Properties eligible for Truist HELOCs include owner-occupied single-family primary residences, second homes, and condominiums in approved states. The bank requires minimum occupancy of second homes for 14 days annually.

SoFi

SoFi offers HELOCs allowing borrowers to access up to 90% of their home equity or $500,000, whichever is less. The online lender emphasizes a streamlined digital experience for tech-comfortable borrowers.

SoFi HELOC applicants can complete the entire process online, though the company works with Spring EQ as a lending partner for some transactions. Rates and terms vary based on credit profile, equity position, and property location. The combination of SoFi's user-friendly platform with competitive home equity products makes it worth considering when comparing options.

How to Apply for HELOC Online

The digital lending revolution has made it easier than ever to apply for HELOC online without visiting a bank branch. Understanding the process helps you prepare and move through approval efficiently.

Gather Required Documentation

Before starting your application, collect the documents lenders typically require. These include recent pay stubs or proof of income, W-2 forms or tax returns from the past two years, current mortgage statements, property insurance information, and government-issued identification. Self-employed borrowers may need additional documentation including profit and loss statements and business tax returns.

Check Your Credit Score

Most HELOC lenders require minimum credit scores between 620 and 680, though the best rates go to borrowers with scores of 740 or higher. Review your credit report before applying to identify any errors that could affect your approval or rate. Addressing issues beforehand can improve your terms and increase approval likelihood.

Estimate Your Home's Value

Understanding your home's approximate value helps set realistic expectations for how much you can borrow. Online valuation tools provide estimates, though lenders will verify value through their own appraisal process. Many online lenders like Figure use automated valuation models that eliminate the need for in-person appraisals, speeding the process significantly.

Compare Multiple Lenders

Shopping among several lenders helps ensure you get competitive rates and terms. Many lenders offer prequalification with soft credit pulls that do not affect your credit score, allowing you to compare offers before committing. Pay attention to interest rates, closing costs, annual fees, and special features like fixed-rate conversion options.

Complete the Online Application

When you apply for HELOC online, expect to provide personal information including Social Security number, employment details, income information, and property details. Applications typically take 10 to 15 minutes to complete. Digital lenders like Figure can provide preliminary approval within minutes, while traditional banks may take several days for initial decisions.

Undergo Verification and Appraisal

After initial approval, lenders verify your information and assess your property's value. Traditional lenders often require in-person appraisals, which can extend timelines by several weeks. Online lenders using automated valuation models may complete this step much faster. Be prepared to provide additional documentation if requested during underwriting.

Close and Access Funds

Once approved, you will review and sign closing documents. Some lenders offer electronic notarization, allowing fully remote closings in eligible states. Others require in-person signing with a notary. After closing, funds typically become available within a few days, though some lenders provide same-day or next-day access.

HELOC Rates and What Affects Them

Current HELOC rates have declined following Federal Reserve rate cuts in 2025, with average rates falling from around 10.70% in late 2024 to approximately 9.00% by late 2025. Well-qualified borrowers with excellent credit can find rates in the 6% to 7% range, particularly with lenders offering rate discounts for autopay enrollment or existing customer relationships.

Several factors influence the rate you will receive when you apply for HELOC online or through traditional channels.

Credit Score

Your credit score serves as the primary determinant of your HELOC rate. Borrowers with scores of 740 or higher typically qualify for the best available rates. Scores between 680 and 739 receive competitive but higher rates, while scores below 680 may still qualify but at premium rates. Improving your credit score before applying can save significant money over the life of your HELOC.

Loan-to-Value Ratio

The percentage of your home's value you want to borrow affects your rate. Lower loan-to-value ratios represent less risk for lenders, translating to better rates for borrowers. If you have substantial equity, requesting a credit limit well below your maximum can result in more favorable terms.

Debt-to-Income Ratio

Lenders evaluate how much of your monthly income goes toward debt payments. A lower debt-to-income ratio demonstrates capacity to handle additional payments, potentially improving your rate offer. Most lenders prefer DTI ratios below 43% to 50%, depending on other qualification factors.

Property Type and Occupancy

Primary residences typically receive the best HELOC rates. Second homes and investment properties carry higher risk from the lender's perspective, resulting in higher rates and potentially stricter qualification requirements. Some lenders do not offer HELOCs on non-primary residences at all.

Lender Relationship

Existing customers often receive rate discounts. The US Bank HELOC, for example, offers 0.50% off with a checking account and autopay setup. Bank of America provides discounts through its Preferred Rewards program. These relationship benefits can add up to meaningful savings over your draw and repayment periods.

HELOC vs Home Equity Loan: Choosing the Right Option

Understanding the difference between HELOCs and home equity loans helps you select the appropriate product for your situation. Both use your home as collateral but function quite differently.

HELOCs provide revolving credit access during the draw period, making them ideal for ongoing or uncertain expenses. You borrow only what you need when you need it, paying interest only on the amount drawn. Variable rates mean payments can fluctuate, though fixed-rate conversion options provide stability when desired.

Home equity loans, including the Rocket Mortgage home equity loan, deliver a lump sum upfront with fixed rates and predictable payments throughout the loan term. This structure suits one-time expenses with known costs, like a specific home renovation project or debt consolidation where you want to pay off balances immediately.

If you are unsure which product fits best, consider whether your funding needs are ongoing or one-time, whether you prefer payment predictability or flexibility, and how comfortable you are with variable interest rates. Many borrowers find HELOCs preferable for their flexibility, while others appreciate the certainty of fixed home equity loan payments.

Common Uses for HELOC Funds

Homeowners tap their equity for various purposes, with some uses providing better financial value than others.

Home Improvements

Renovations and repairs represent one of the most financially sound uses for HELOC funds. Improvements can increase your home's value, potentially offsetting or exceeding borrowing costs. Interest on HELOCs used for home improvements may qualify for tax deductions, adding further value. Projects ranging from kitchen remodels to energy efficiency upgrades become more accessible with HELOC financing.

Debt Consolidation

Replacing high-interest credit card balances with lower-rate HELOC borrowing can save substantial money. If you have $30,000 in credit card debt at 20% interest, consolidating to an 8% HELOC reduces your interest charges significantly. However, this strategy requires discipline to avoid running up new credit card balances while paying down the HELOC.

Education Expenses

College tuition and related education costs can be financed through HELOCs, often at rates lower than private student loans. Parents helping children through college or adults returning to school themselves may find HELOCs attractive for covering educational expenses.

Emergency Funds

Having a HELOC available provides a financial safety net for unexpected expenses. You pay nothing unless you draw funds, making it a cost-free backup resource. Medical emergencies, job loss, or major repairs become more manageable with ready access to home equity borrowing.

Business Purposes

Entrepreneurs sometimes use HELOCs to fund business startup costs or expansion. Lower rates compared to business loans or credit cards can make this attractive, though mixing personal and business finances carries risks. Consult financial and legal advisors before using home equity for business purposes.

Risks and Considerations

While HELOCs offer valuable benefits, understanding the risks helps you borrow responsibly.

Your Home Secures the Debt

Unlike credit cards or personal loans, HELOCs use your home as collateral. Failure to make payments can result in foreclosure. Borrow only what you can comfortably repay, and maintain emergency reserves to cover payments during financial difficulties.

Variable Rates Can Increase

Most HELOCs have variable rates that rise when the prime rate increases. If rates climb significantly, your monthly payments will increase. Consider fixed-rate options or conversion features if rate volatility concerns you. Budget for potential rate increases when calculating affordability.

Payment Shock at Repayment Period

Transitioning from interest-only draw period payments to principal-and-interest repayment payments can cause payment shock. A $50,000 balance at 8% costs about $333 monthly in interest only, but full repayment over 20 years requires approximately $418 monthly. Plan ahead for this increase as your draw period ends.

Temptation to Overborrow

Easy access to credit can lead to borrowing more than necessary. Treat your HELOC as a financial tool rather than extra spending money. Create a clear plan for how you will use funds before drawing them.