Most lenders allow a combined loan-to-value (CLTV) of 80-85%. Your maximum credit line is 80-85% of home value minus your existing mortgage balance.
Max credit line = (Home value × 80-85%) − Existing mortgage balance During the draw period, most HELOCs allow interest-only payments. During repayment, you pay principal plus interest over the remaining term.
The payment jump to expect
On a $60,000 draw at 8.45%, interest-only draw-period payments run about $422/month. Once repayment begins over 20 years, the payment rises to roughly $517/month — plan for this increase well before the draw period ends, especially since HELOC rates are variable and can rise further.
HELOC vs cash-out refinance
A HELOC keeps your existing first mortgage rate untouched — critical if you refinanced or bought during the low-rate years before 2022. A cash-out refinance replaces your entire loan at current rates. For most homeowners holding a sub-5% first mortgage, a HELOC is meaningfully cheaper overall.
Most lenders allow 80-85% combined loan-to-value. On a $480,000 home with a $280,000 mortgage, an 85% CLTV limit gives roughly $408,000 total secured debt allowed, minus your $280,000 balance — about $128,000 of available HELOC credit.
What is the average HELOC rate in 2026?
Approximately 8.45% variable for borrowers with good credit, tied to the prime rate. Rates move with Federal Reserve policy changes.
What happens when the draw period ends?
Payments shift from interest-only to principal plus interest, typically increasing significantly. On a $60,000 balance at 8.45%, expect the payment to rise from roughly $422 to $517/month moving into a 20-year repayment period.
Is HELOC interest tax deductible?
Only if the funds are used to buy, build, or substantially improve the home securing the loan, per current IRS rules. Using HELOC funds for other purposes removes the deduction.
HELOC or home equity loan — what is the difference?
A HELOC is a revolving line of credit with a variable rate, similar to a credit card secured by your home. A home equity loan is a lump-sum, fixed-rate loan. HELOCs offer flexibility; home equity loans offer payment certainty.