Is a HELOC Right for You?

For many homeowners, the idea of tapping into home equity is appealing, especially when you're juggling rising costs, eyeing home upgrades, or considering investment opportunities. But with mortgage rates still higher than they’ve been in years, most homeowners don’t want to refinance and lose the low rate they locked in during the boom.

That’s where a HELOC comes in. A Home Equity Line of Credit gives you access to your home’s equity, without refinancing your first mortgage.

Whether you’re sitting on years of equity growth or just bought a home a few years ago, this guide will help you understand what a HELOC is, how it works, and when it actually makes sense.

What Is a HELOC (Home Equity Line of Credit)?

A HELOC is a second mortgage, but unlike a traditional loan, it works like a credit card. You get approved for a maximum line of credit (based on your equity), and you can borrow from it as needed during the draw period, which typically lasts 5 to 10 years. You’ll make interest-only payments during this time.

After the draw period ends, the repayment period begins. You’ll then make regular monthly payments on the amount you borrowed, plus interest, over the next 10 to 20 years. HELOCs are revolving, meaning you can borrow, pay it back, and borrow again (as long as you're in the draw period), giving you flexibility that a lump-sum loan doesn’t offer.

Why More Homeowners Are Choosing HELOCs Right Now

Let’s be honest. No one wants to give up a 2% mortgage rate just to pull out cash at 7.5%. With HELOCs, you don’t have to. A HELOC preserves your existing mortgage and gives you access to cash, all at the same time. Think of it as keeping the best of both worlds—low interest on your main loan and flexibility on what you borrow.

Plus, as home values have increased over the last several years, more homeowners have more equity than they realize, and a HELOC is one of the most flexible ways to tap into it.

Top 5 Smart Ways to Use a HELOC

Used correctly, a HELOC is a strategic financial tool. Here are some of the most common—and smartest—ways homeowners are putting their equity to work:

1. Home Renovations That Build Equity
   Upgrading your kitchen or bathroom? Adding an office or converting your basement? These improvements can increase the value of your home, which may boost your resale value and help you grow your net worth.

2. Debt Consolidation
   If you’re paying 22% on a credit card, a HELOC at 8–10% can save you thousands in interest. It’s a disciplined way to get out of the debt cycle, as long as you don’t rack up new debt after consolidating.

3. Emergency Funds
   Life happens. A HELOC can serve as a backup emergency fund so you don’t have to rely on high-interest personal loans or drain your savings.

4. Funding an Investment Property
   Some savvy buyers use their HELOC to cover the down payment on a second home or investment property. This allows you to expand your real estate portfolio without liquidating other assets.

5. Education or Major Life Expenses
   Some borrowers use their HELOC for tuition, weddings, or even launching a business. While it’s important to evaluate the return on that expense, the flexibility is there when you need it.

How Much Can You Borrow with a HELOC?

Most lenders allow you to borrow up to 85% of your home’s appraised value, minus what you still owe on your mortgage.

Here’s a quick example:

• Home Value: $400,000

• Current Mortgage Balance: $250,000

• 85% of Home Value: $340,000

• HELOC Max: $340,000 - $250,000 = $90,000

This number can vary based on your credit, income, and lender-specific guidelines, but it gives you a ballpark.

HELOC vs. Cash-Out Refinance: Key Differences

While both allow you to pull cash from your home, only a HELOC lets you leave your first mortgage alone. A cash-out refinance replaces your original loan, usually at a higher rate in today’s market. A HELOC, on the other hand, sits alongside your current loan, giving you access to funds without changing anything about your existing mortgage. If you want to keep your low rate and only need funds over time, a HELOC is likely the better option.

HELOC Qualifications: What Do Lenders Look For?

While requirements vary by lender, you’ll generally need:

• 15–20% equity in your home

• A credit score of 660 or higher

• Stable income and a debt-to-income ratio under 45%

• A good payment history on your mortgage

If you're considered self-employed (ie, freelancer, gig-worker, business owner), you may still qualify, but be prepared to show more documentation, like tax returns or bank statements. If your finances are a little outside the box, it helps to work with a mortgage broker who can connect you with flexible lenders.

Is a HELOC Right for You?

Here are some questions to ask yourself:

• Do you need access to funds over time, rather than all at once?

• Are you comfortable with a variable interest rate?

• Will you use the funds for something that brings value, like consolidating debt or investing in your home or future?

• Do you want to preserve your current low mortgage rate?

If you answered yes to most of the above, a HELOC could be the tool that gives you financial breathing room without disrupting your foundation.

Your Equity, Your Strategy, Your MARQ

Your home is more than where you live, it’s also one of your most powerful financial tools. A HELOC allows you to unlock that value without compromising the low-rate mortgage you already have. But like any tool, it only works when used strategically. That’s where MARQ Mortgage comes in.

Curious how much equity you could access, or whether a HELOC fits your financial goals? Let’s talk.  Our team will walk you through your options and help you create a plan that works for where you are now, and where you want to go. Let's get started.