{"id":467194,"date":"2022-10-18T16:40:12","date_gmt":"2022-10-18T15:40:12","guid":{"rendered":"https:\/\/www.finder.com\/uk\/?page_id=467194"},"modified":"2026-05-11T02:26:37","modified_gmt":"2026-05-11T01:26:37","slug":"home-equity-line-of-credit","status":"publish","type":"post","link":"https:\/\/www.finder.com\/uk\/personal-loans\/home-equity-line-of-credit","title":{"rendered":"Home equity line of credit UK"},"content":{"rendered":"

With money tight for many households, you might be looking for ways to access some extra cash. If you\u2019re a homeowner, one potential way to do this is to release some of the equity in your property. <\/p>

Equity refers to how much of the value of your home you own outright. Your home equity should rise over time as you make your mortgage payments and if the value of your home increases. Releasing some of that equity could enable you to pay for important home improvements, pay for school fees or simply live more comfortably. <\/p>

One way to do this is through a HELOC.<\/p>

What is a HELOC?<\/h3>

A HELOC, or home equity line of credit, is a type of revolving credit that enables you to borrow against the equity in your home. The amount borrowed is secured against your property and you then receive the funds as a line of credit. <\/p>

You can draw on these funds for a set number of years, usually between 5 and 10, and this is known as your \u201cdraw period\u201d. You can only draw funds up to your set credit limit and you then repay the amount borrowed plus interest. <\/p>

HELOCs are commonly used by homeowners in the US, Canada and Australia, but they are now starting to hit the UK market.<\/p>

How does a HELOC work?<\/h3>

A HELOC works a bit like a credit card in terms of the flexibility it offers. Instead of borrowing a fixed lump sum as you would with a standard loan, you can continuously borrow against your line of credit as long as you don\u2019t exceed your credit limit. During your draw period, you can draw on your funds, repay them and then redraw. <\/p>

This flexibility can be particularly useful if you\u2019re not sure how much money you need \u2013 if you are carrying out home improvements and they end up being more costly than expected, you can simply borrow more from your line of credit. <\/p>

Once the draw period has come to an end and you\u2019ve entered your repayment period, you can no longer access your funds and must repay the amount borrowed, plus interest. <\/p>

You\u2019ll only ever pay interest on the amount you\u2019ve borrowed \u2013 you won\u2019t be charged interest on any funds you\u2019ve left untouched. What\u2019s more, if you\u2019re paying for something in stages, you can draw on funds as needed and you won\u2019t need to pay interest on the whole amount from the beginning. <\/p>

How do HELOC repayments work?<\/h3>

HELOCs have 2 payment periods \u2013 the draw period and the repayment period. <\/p>

During the draw period, you can borrow money from your HELOC as often as needed. You can also make repayments during that time \u2013 these might be interest only, or you can choose to pay off some of the capital too.<\/p>

During the repayment period, which starts after the draw period ends, you must pay off the full amount borrowed plus interest. You can no longer make withdrawals during this time. <\/p>

Some HELOC providers allow you to be flexible with your repayments, so you can choose to pay off more each month if you wish to without paying a penalty fee. You will also usually be able to select how long you want your repayment period to be, whether that\u2019s 5 years or 30 years.<\/p>

Pros and cons of HELOCs<\/h3>
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Pros<\/h4>\n