HELOC — Home Equity Line of Credit
What It Is, Why You Should Have One, and Why We Send You to a Bank to Get It
An Honest Note Before We Start
We do not offer HELOCs at First Commerce Financial. Our wholesale lenders do not allow us to originate home equity lines of credit the way banks and credit unions can — and banks will often do them for free with no closing costs, which we cannot match.
So why are we writing this page? Because a HELOC is one of the most powerful financial tools a homeowner can have — and we have been telling our clients that for 30 years. If we can help you understand it, get one, and use it wisely, you will be a better-positioned client when it comes time to buy, sell, or refinance. That is the whole point.
Our recommendation: get a HELOC from your local bank or credit union. Then call us when it is time to use your primary mortgage.
What Is a HELOC?
A home equity line of credit — HELOC — is a revolving line of credit secured by the equity in your home. Think of it like a credit card, but with your house as collateral and a much lower interest rate. You are approved for a maximum credit limit, and you can draw from it, pay it back, and draw again — as many times as you want during the draw period, which is typically 10 years.
Unlike a home equity loan, which gives you a lump sum at a fixed rate, a HELOC is flexible. You borrow only what you need, when you need it. You pay interest only on what you have drawn, not on the full credit line.
Kirk's Perspective — 30 Years of Using This Tool
I have had a HELOC on my primary home for most of my adult life. Not because I was in financial trouble — because it is the smartest financial safety net a homeowner can have. It sits there at zero balance, costs me nothing, and is available the moment I need it. Emergency roof repair. Business opportunity. Bridge financing between a sale and a purchase. Investment down payment.
The homeowners who struggle in financial emergencies are the ones who have equity but no access to it. A HELOC solves that problem — and it costs you nothing until you actually use it. Get one now, while you do not need it. Because when you need it, you may not qualify.
— Kirk Chivas, Co-Founder, First Commerce Financial (NMLS 160828)
What Can You Use a HELOC For?
Home Improvements
Kitchens, bathrooms, additions. Often increases home value beyond the cost. Interest may be tax deductible.
Emergency Fund
Roof, HVAC, major repairs. Costs nothing until you use it. Better than draining your savings.
Debt Consolidation
Pay off high-rate credit cards at 7% instead of 20%+. Saves thousands in interest annually.
Bridge Financing
Buy your next home before you sell your current one. Avoid contingency offers in competitive markets.
Investment Down Payment
Use equity in your primary home to fund the down payment on a rental property.
Education or Business
Fund tuition or a business opportunity at a rate far below personal loans or business credit lines.
HELOC vs. Cash-Out Refinance — Which Is Right for You?
This is where we come in. If you need access to equity and you are trying to decide between a HELOC and a cash-out refinance, we can help you run the numbers honestly. Here is the basic framework:
| Factor | HELOC | Cash-Out Refinance |
|---|---|---|
| Rate type | Variable (tied to prime rate) | Fixed for life of loan |
| Current avg rate | 7.21% (May 2026) | Depends on your primary rate |
| Closing costs | Often $0 at banks/credit unions | Typically $3,000–$8,000 (or no-cost option) |
| Your primary mortgage | Stays untouched | Replaced with new loan |
| Best if you have a low rate | Yes — keep your rate | No — you give it up |
| Best if you have a high rate | Less compelling | Yes — lower rate + cash out |
| Flexibility | Draw and repay as needed | Lump sum at closing only |
| Who provides it | Your local bank or credit union | First Commerce Financial |
The general rule: if your primary mortgage rate is below 5.5%, a HELOC almost always makes more sense than a cash-out refinance. You protect your low rate and still get access to your equity. If your primary rate is 6.5% or higher, a cash-out refinance may actually save you money on your primary payment while also putting cash in your pocket — and that is a conversation worth having with us.
How to Get a HELOC — Where We Send Our Clients
We genuinely send our clients to local banks and credit unions for HELOCs — and we have no financial incentive to do so. Here is what to look for:
- No closing costs — most major banks and credit unions offer this. Do not pay closing costs on a HELOC.
- No annual fee — or a very low one. Some charge $50–$75 per year; avoid anything higher.
- No early termination fee — or at least a short window (1–3 years). You want to be able to close it without penalty if you sell.
- Variable rate tied to prime — standard. Know that it will move when the Fed moves rates.
- 10-year draw period — standard. Avoid lenders offering shorter draw periods.
Check your primary mortgage bank first, then your local credit union. Credit unions are often the most competitive on HELOC rates and fees. Call at least two or three before you decide.
One Important Warning
A HELOC is secured by your home. If you draw on it and cannot repay it, your home is at risk. Use it as the financial tool it is — not as a source of discretionary spending. Kirk has used one for 30 years by treating the balance like a bill to be repaid, not free money to be spent.
Frequently Asked Questions
Why don't mortgage brokers offer HELOCs?
Wholesale lenders — the lenders that mortgage brokers work with — generally do not offer home equity lines of credit on the same terms that banks and credit unions do. Banks can offer HELOCs with no closing costs because they hold the loan on their own books and recoup the cost over time through the interest you pay. Wholesale lenders who sell loans on the secondary market do not have that same flexibility. It is one of the few cases where going directly to a bank is the right move.
How much can I borrow with a HELOC?
Most lenders allow you to borrow up to 80% of your home's value minus your existing mortgage balance. For example, if your home is worth $500,000 and you owe $300,000, you have $200,000 in equity. At 80% combined LTV, your maximum HELOC would be $100,000 ($400,000 max minus $300,000 owed). Some lenders go up to 85% or 90% for well-qualified borrowers.
Does a HELOC affect my primary mortgage?
No — a HELOC is a second lien on your property. Your primary mortgage stays exactly as it is. The HELOC lender is in second position behind your primary mortgage lender. That is why protecting a low primary rate with a HELOC is so powerful — you get access to equity without touching your existing loan.
Is HELOC interest tax deductible?
It depends on how you use the funds. Interest on a HELOC is tax deductible when the funds are used to buy, build, or substantially improve the home that secures the loan. If you use HELOC funds for debt consolidation, a car, or other personal expenses, the interest is generally not deductible. Talk to your tax advisor about your specific situation.
What happens after the draw period ends?
After the 10-year draw period, the HELOC enters a repayment period — typically 20 years — during which you can no longer draw funds and must repay the outstanding balance. Your payment will include both principal and interest. If you have a large balance at the end of the draw period, your payment can increase significantly. Plan accordingly.
When does a cash-out refinance make more sense than a HELOC?
If your current mortgage rate is 6.5% or higher, a cash-out refinance can lower your primary rate, reduce your monthly payment, and put cash in your pocket — all in one transaction. You give up the flexibility of a revolving line, but the overall financial picture can be significantly better. We can run both scenarios for you and show you the numbers side by side.
Can I have both a HELOC and do a refinance later?
Yes — and this is actually a smart strategy. Get a HELOC now for flexibility and emergency access. When rates drop enough to make a refinance compelling, we can help you refinance your primary mortgage. The HELOC will need to be subordinated (the HELOC lender agrees to remain in second position), which most lenders will do as a standard process.
Have a Rate of 6.5% or Higher? A Cash-Out Refi May Beat a HELOC.
If your primary mortgage rate is 6.5% or above, refinancing and pulling cash out may save you more than a HELOC — lower rate, lower payment, and equity in your pocket. Join our Rate Watch System and we will tell you exactly when the math works in your favor.
Join the Rate Watch System — FreeNo pressure. No spam. Just a call from Kirk or Ken when it is time to move.
Questions About Your Equity Options?
Not sure whether a HELOC, a cash-out refinance, or something else makes the most sense for your situation? Call us. We will give you an honest answer — even if that answer is "go to your credit union."
Talk to Kirk or KenOr call or text us directly at (248) 459-5511
First Commerce Financial | Independent Mortgage Broker | NMLS #137512 | Licensed in Michigan, Florida, Arizona, and Texas | We do not offer HELOCs — this page is provided for educational purposes only.
