HELOC and Home Equity Mortgage Terms Glossary

Credit Limit

The maximum amount a borrower is approved to borrow on a revolving credit facility such as a HELOC. Determined by the available equity in the property, the combined loan-to-value limit, and the borrower's creditworthiness.

Debt Consolidation

Combining multiple debts into a single loan, typically at a lower interest rate or with a lower monthly payment. Homeowners often use a cash-out refinance or home equity loan to consolidate high-interest credit card debt, auto loans, or student loans into a single mortgage payment. Reduces complexity but extends repayment and uses home equity as collateral.

• Cash-Out Refinance program

Draw

The act of accessing funds from a revolving credit line such as a HELOC or a construction loan disbursement. On a HELOC, draws can be made anytime during the draw period up to the credit limit. On a construction loan, draws are requested at specific construction milestones and verified by the lender.

Draw (HELOC)

A withdrawal of funds from a home equity line of credit during the draw period. Borrowers can take multiple draws up to their credit limit using checks, a debit card, or online transfer. Interest is charged only on the amount drawn, not the full credit line.

Draw Period

The initial phase of a home equity line of credit during which the borrower can access funds, typically lasting 10 years. During the draw period, most HELOCs require interest-only payments on the outstanding balance. No new draws are permitted after the draw period ends. The repayment period then begins, typically lasting 20 years.

• HELOC program

Draw Period (HELOC)

The period during which a HELOC borrower can access funds from their line of credit, typically 10 years. During the draw period, most HELOCs require interest-only payments. After the draw period ends, the repayment period begins and no new draws are permitted.

• HELOC program

End of Draw

The point at which a borrower can no longer access funds from a home equity line of credit. At the end of draw, the HELOC transitions to the repayment period. Depending on the original terms, the borrower may owe a lump-sum payoff or begin fully amortizing payments of principal and interest.

HELOC (Home Equity Line of Credit)

A revolving line of credit secured by your home's equity. Like a credit card, you borrow what you need up to a set limit during a draw period, then repay it. Interest is charged only on the amount borrowed.

• HELOC program

Home Equity Loan

A fixed-rate loan that lets you borrow against your home's equity in a lump sum. Different from a HELOC in that you receive all the money at once and repay it on a fixed schedule.

• Home Equity Loan program

Repayment Period

On a HELOC, the period that begins when the draw period ends. During the repayment period the borrower can no longer take draws and must repay the outstanding balance plus interest on a fixed amortization schedule, typically over 10 to 20 years.

Revolving Line of Credit

A credit facility that allows repeated borrowing up to a set limit during a draw period, with available credit restored as repayments are made. A HELOC is the most common revolving line of credit secured by real estate. Unlike installment loans with fixed payment schedules, revolving credit gives the borrower flexibility to draw and repay as needed.

• HELOC program

Second Mortgage

A loan secured by your home that is subordinate to your primary mortgage. Includes home equity loans and HELOCs. In foreclosure, the primary mortgage is paid first.