How it works
You’re approved for a credit limit and draw from it during a draw period, often 10 years. Then you repay over a set period.
Pros and cons
- Borrow only what you need, when you need it
- Rates usually change with the prime rate
- Payments can rise when the draw period ends
Compared with a home equity loan
A home equity loan gives you a fixed amount, rate and payment from day one.
A payment example
Draw $50,000 at 8.5% variable. During the draw period you may pay interest only. When repayment starts, the payment rises, and more if rates go up.
Questions to ask
- How long is the draw period?
- Is there a rate cap?
- Are there annual or inactivity fees?
- Can I fix part of the balance?
How much you can borrow
Lenders limit how much you can owe in total against your home, counting your first mortgage and the new line. The limit varies by lender, loan type and purpose.
Draw period vs. repayment
During a 10-year draw you may pay interest only. In the repayment period, the payment rises because you repay principal too.
HELOC vs. home equity loan
If you know the amount and want a fixed payment, a home equity loan gives certainty. CapCenter offers fixed-rate home equity loans from $50,000 to $250,000 with ZERO Closing Costs (restrictions apply).
Good uses
- Projects with costs that arrive over time
- A backup emergency line
- Short-term needs you’ll repay quickly
