HELOC
Home equity line of creditA HELOC, a home equity line of credit, is a revolving loan secured by a home: a credit limit the borrower can draw on, repay and draw on again, with the house as collateral. The limit is sized from the equity in the home, its value minus what is already owed against it.
What is a HELOC?
A HELOC works like a credit card with a house behind it. During the draw period the borrower can take money up to the limit, and interest is charged only on the balance drawn. When the draw period ends, the borrowing stops and a repayment period begins. The rate is usually variable, so the payment can change from month to month.
It is a different product from a home equity loan, which pays out one lump sum. With a mortgage already on the home, either one is a second mortgage, paid in addition to the first, and both put the home at risk if the payments stop.
The lender sets the limit from a combined loan-to-value cap across every loan secured by the home, and can freeze or cut the line if the home's value falls significantly below its appraised value.
How a HELOC works, with numbers
A home is worth $600,000 and carries a $380,000 mortgage. A lender working to an 85% cap will let the secured debt reach $510,000, so the HELOC's limit is $130,000.
The owner draws $20,000. The home's equity drops from $220,000 to $200,000, the HELOC's balance is $20,000, and $110,000 of the line is still open.
- Value × 85%
- $510,000
- Mortgage balance
- − $380,000
- HELOC limit
- $130,000
- Drawn
- − $20,000
- Still open on the line
- $110,000
Why a HELOC matters
A draw lowers home equity dollar for dollar the day it lands, because the balance is a loan secured by the home. Net worth is a different matter: a draw creates a debt and an equal amount of cash, so the total moves only as that money is spent. Interest accrues only on the drawn balance.
The end of the draw period is the hinge: from then on the balance is repaid rather than drawn on.
HELOC in Taiga Finance
In Taiga Finance a HELOC is a row on the Debt page, added with its Type set to “HELOC” and tied to a home through the “Secured property” field. On the property's loan card it then shows beside the mortgage, read-only, with its “APR”, its “Min payment” and the lender on its “Account” row. The balance comes live from a connected account or is kept by hand.
Once linked, the balance lowers that home's Equity figure. In net worth it subtracts in its own “Home Equity” band, separate from the “Mortgage” band, while the home's value still counts in full under “Real Estate”.
Tracking a HELOC, in the help center →Key takeaways: HELOC
- A HELOC is a revolving line of credit secured by a home, drawn and repaid during a draw period, then paid down over a repayment period.
- The lender sets the limit from the home's equity under a combined loan-to-value cap.
- The rate is usually variable, and interest is charged only on the balance drawn.
- A draw lowers home equity dollar for dollar; net worth moves as the drawn money is spent.
Questions about HELOC
What is a HELOC?
A home equity line of credit: a revolving loan secured by a home, with a limit sized from the home's equity. The borrower draws and repays during a draw period, then pays the balance down over a repayment period. The rate is usually variable.
How is a HELOC tracked in Taiga Finance?
As a debt with its Type set to HELOC, linked to a property through the Secured property field. It shows read-only on the property's loan card, lowers that home's equity, and lands in the Home Equity band of net worth. Its balance syncs from a connected account or is entered by hand.
Does a HELOC lower my net worth?
Not at the draw. A draw creates a debt and an equal amount of cash, so net worth holds until the money is spent; home equity falls dollar for dollar at once. The undrawn part of the line changes nothing. In Taiga Finance the balance subtracts in the Home Equity band while the cash counts on the asset side once it lands in an account the app tracks, and the home's full value still counts under Real Estate.