Revolving credit secured by home equity — flexible capital for investors.
A HELOC (Home Equity Line of Credit) is a revolving line of credit secured by the equity in a home — typically the borrower's primary residence. Unlike a closed-end loan that funds a single advance, a HELOC works like a credit card: the borrower can draw and repay against an approved credit limit, paying interest only on the outstanding balance.
HELOCs have two phases. The draw period (typically 10 years) is when the borrower can draw against the line, repay, and re-borrow as needed. Payments during the draw period are typically interest-only on the outstanding balance. The repayment period (typically 10–20 years after draw period ends) is when no further draws are allowed and the outstanding balance amortizes over the remaining term.
HELOC rates are typically variable, tied to a prime rate index plus a margin. A typical HELOC might price at "Prime + 0.50%" — meaning if Prime is 7.50%, the rate is 8.00%. The variable rate exposes the borrower to interest rate risk, which is the trade-off for the flexibility and minimal up-front costs (no points, often no appraisal).
For real estate investors, HELOCs are a powerful capital source. The investor borrows against their primary residence (or an investment property where allowed), uses the funds to acquire or rehab additional properties, then repays the HELOC as those properties stabilize and refinance. This creates a capital recycling cycle similar to BRRRR but using HELOC capital instead of fresh equity.
Limitations matter. HELOCs are typically only available on primary residences — investment property HELOCs exist but are limited to a few lenders and price higher. HELOC payments compound with first mortgage payments, raising DTI and limiting capacity for additional conventional financing. And HELOCs are callable in some scenarios — banks can freeze the line during severe credit events.
| Primary residence value | $685,000 |
| First mortgage balance | $285,000 |
| Max HELOC (90% CLTV cap) | $331,500 |
| Use case: Fix-and-flip down payment + rehab | |
| Investment property purchase | $190,000 |
| Down payment (10%) | $19,000 |
| Rehab cost | $45,000 |
| Cash needed | $64,000 |
| Draw on HELOC | $64,000 @ 8.5% IO |
| Monthly interest payment | $453 |
| Flip exits in 7 months | Repay HELOC at sale |
A Home Equity Line of Credit — a revolving line of credit secured by home equity. The borrower can draw, repay, and re-borrow against an approved credit limit during a draw period.
HELOC is a separate second loan with a revolving credit limit and variable rate. Cash-out refinance replaces the first mortgage with a larger loan, taking cash out at closing — fixed rate, fixed amount. HELOC is more flexible; cash-out locks in rate and amount.
Yes, but options are limited. Most major banks only offer HELOCs on primary residences. Some non-QM and portfolio lenders offer investment property HELOCs at higher rates and lower max LTV.
For acquisition down payments, rehab funding, or carrying costs on flip and BRRRR deals. The HELOC funds the deal; deal exit (refi or sale) repays the HELOC. Repeat cycle creates capital recycling.
Variable rate exposure, payment shock when draw period ends and amortization begins, and risk of foreclosure on primary residence if not repaid. Some HELOCs can also be frozen by the lender during severe credit events.
Matrix structures bridge and DSCR debt that complements HELOC strategies — funding deal-level debt while HELOC covers equity recycling.
