HELOC Basics
This is what the acronym HELOC stands for.
What is Home Equity Line of Credit?
Most HELOCs use this benchmark rate to determine interest.
What is the prime rate?
This is how much the customer owes compared to how much their home is worth.
What is equity?
A customer asks, “Do I have to use the line right away?”
What is “No—you can open it for flexibility and use it whenever needed”?
Home is worth $300,000. Mortgage is $200,000. How much equity?
What is $100,000?
This period is when customers can borrow from their line.
What is the draw period?
This type of interest structure is most common for HELOCs.
What is a variable rate?
This factor—along with equity and income—is essential for HELOC approval.
What is the credit score?
Customer wants a HELOC to remodel but isn’t sure of their home’s value.
What is “We can order an appraisal or valuation to confirm equity”?
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Home value: $250,000. Max LTV: 80%. What is the max loan amount?
What is $200,000
A HELOC is secured by this asset.
What is the borrower’s home?
When the draw period ends, the customer enters this phase
What is the repayment period?
If a customer already has a mortgage, lenders use this combined ratio to estimate eligibility.
What is CLTV (combined loan‑to‑value)?
Customer is nervous about rising rates.
What is “Discuss variable rate behavior, payment examples, and any fixed‑rate advance options”?
Using that same house, mortgage is $150,000. How much HELOC could they potentially get?
What is $50,000?
This term describes the maximum percentage of a home’s value a lender will allow.
What is loan‑to‑value (LTV)?
This is the option some lenders offer to convert part of a variable balance into a fixed rate.
What is a fixed‑rate advance or rate lock option?
Name any two reasons a HELOC might be denied even when equity is sufficient
What are: low credit score, high DTI, poor property condition, unstable income/documentation issues, or recent delinquency?
Customer wants a HELOC for debt consolidation but has borderline credit.
What is “Review full financial picture—DTI, income, equity—and discuss alternatives if needed”?
Home value: $400,000. Mortgage: $260,000. Max CLTV: 85%. What’s the max HELOC?
What is $80,000?
(0.85 × 400k = 340k; 340k – 260k = 80k)
These two products are commonly confused, but one is revolving and the other is installment.
What are a HELOC and a Home Equity Loan?
Making this type of payment during the draw period reduces overall costs long‑term.
What are principal payments?
This document is often required to confirm the home’s value.
What is an appraisal?
Customer wants to know how quickly they can access funds.
What is “Once approved and closed, funds can typically be accessed by transfer, check, or card depending on the product”?
HELOC balance is $30,000 at 8% APR. Interest‑only payment?
What is $200?
(0.08 ÷ 12 × $30,000)