HELOC

You own a home worth $400,000 and you owe $200,000 on your mortgage. That $200,000 gap — your equity — is an asset you can borrow against. A HELOC turns that equity into a revolving credit line, like a credit card secured by your house.

Lenders care because it's collateralized debt — the house backs the loan, so default risk is lower than unsecured credit. Borrowers care because the rates are typically far below personal loans or credit cards, and you only pay interest on what you actually draw.

How It Works

A HELOC has two phases: the draw period and the repayment period. During the draw period — typically 5 to 10 years — you can borrow, repay, and borrow again up to your credit limit. Think of it as a revolving door, not a one-time withdrawal.

Lenders usually cap your total borrowing at 80–85% of your home's appraised value, minus what you still owe. On that $400,000 home with a $200,000 mortgage, an 80% LTV cap gives you a $120,000 credit line. That ceiling matters — it's not unlimited access to your equity.

Most HELOCs carry a variable rate tied to the prime rate, so your monthly interest cost moves with the market. When rates rise, so does your payment — even on balances you've already drawn.

Why It Matters

The HELOC is showing up in crypto-lending conversations for two reasons. First, platforms like Figure Technologies are originating HELOCs on blockchain infrastructure, cutting closing times from weeks to days. Second, the HELOC model — borrow against an asset you keep — is the direct structural ancestor of crypto-backed loans. Understanding one helps you understand the other.

What to Watch

The biggest misunderstanding about HELOCs is that they're stable, low-risk products. They're lower-risk than unsecured debt — but the collateral is your home. Miss payments, or watch your home value drop below the loan balance, and you're looking at foreclosure. The asset backing the loan is also where you sleep.