Glossary
HELOC
A revolving credit line secured by your home, usually at a variable rate — draw and repay as needed, like a credit card backed by the house.
A HELOC works in two phases: a draw period (often 10 years) where you borrow and repay as needed, often with interest-only payments, followed by a repayment period where the balance amortizes fully. Rates are variable and tied to the prime rate, so your payment can rise even if you never draw more money. It suits staggered spending — a phased renovation — better than a one-time cost, where a fixed home equity loan is usually the better fit.
Related terms
- Balloon payment A large lump sum due at the end of a loan term, after years of smaller payments that didn't fully pay off the balance.
- Reverse mortgage A loan for homeowners 62+ that pays you from your home equity instead of the other way around — repaid when you sell, move out, or pass away.
- Short sale Selling a home for less than what is owed on the mortgage, with the lender's approval — an alternative to foreclosure.
- Credit score A 300–850 number summarizing your credit risk. It is the single biggest lever on the rate a lender offers you.
- Origination fee An upfront charge (0–8% of the loan) deducted before funds reach you. A $10,000 loan with a 5% fee delivers $9,500 — but you repay all $10,000.
- Lien A legal claim against property that secures a debt — the lienholder can force a sale to collect if the debt goes unpaid.