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How Does a HELOC Work?

Read Time: 3 Minutes Date Published: October 10, 2025
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Need cash for your goals? A Home Equity Line of Credit (HELOC^) could be a smart way to tap into the value of your home when you need flexible access to funds.

Newrez offers HELOCs to help customers who want to take advantage of their home equity. Read on to find out what a HELOC can do for you.

Understanding HELOCs

A HELOC is a revolving line of credit secured by your home’s equity. It may give you more flexibility than a typical home equity loan in terms of the timing of your monetary draws.

If you qualify, a Newrez HELOC works like this:

  • You are required to draw a minimum of 75% at closing, followed by a 90-day freeze period during which you cannot make draws.
  • The first 3 years of your HELOC are known as the draw period, during which you can draw when you like, up to your credit limit. (Note: the draw period includes the 90-day freeze period.) Any subsequent draws after the first must be a minimum of $1,000 (or a minimum set by your state’s laws).
  • An interest-only period runs concurrently with the 3-year draw period. During this period you are only required to pay interest.
  • Next comes a 17-year repayment period, where you pay back the principal amount you used plus interest. You cannot make draws during this period.
  • Note that the Newrez HELOC is variable rate, meaning your interest rate changes with the Prime Rate as reported in The Wall Street Journal®.

Ways to Use a HELOC

Here are a few practical ways homeowners could tap into their equity with a HELOC:

  • Home Improvements
    Fund kitchen makeovers, bathroom updates, new flooring or energy-efficient windows. Draw as you go, only borrowing what you need for your projects.
  • Emergency Expenses
    Cover surprise costs—HVAC repairs, medical bills or car breakdowns—without raiding your savings. A HELOC might provide a financial safety net when life throws a curveball.
  • Debt Consolidation
    Consolidate high-interest debt using your HELOC. This could give you one simple payment, often with less interest, and increased cash flow to tackle other goals.
  • Weddings & Life Milestones
    Use your HELOC to finance a wedding or family reunion.

Planning to Sell? Here’s What to Know

If you’re thinking about selling your home, any outstanding HELOC balance will typically need to be paid off at closing. So if you’re planning to move soon, a HELOC might not be the best fit. But for homeowners who plan to stay put for a while, it can be a helpful tool for managing expenses or funding big projects.

The Bottom Line

Whatever your financial needs, know that the equity you’ve built up in your home could help you get closer to your goals. Newrez loan experts are available to walk you through your options when you’re ready.

 

The Wall Street Journal® is a registered trademark of Dow Jones & Company, Inc.

Our Home Equity Line of Credit is available for owner-occupied homes. At closing, we’ll draw 75% of your approved credit limit, minus any origination fees. Additional draws can be requested 90 days after closing during the first three years, up to your available limit. Rates will vary based on factors like your credit score and your total loan-to-value ratio. Loan amounts range from $50,000 to $350,000. To determine your home’s value, we may use independent data sources or automated valuation models, and in some cases, an appraisal may be required. This product is only available for eligible borrowers, certain property types, and in select states. Pre-approval is based on the information you provide and is subject to verification and full underwriting review. Not all applicants will qualify.

Learn more in our other educational series.

We’ve assembled a treasure trove of jargon-free information to demystify home-financing and arm you with valuable insights and actionable options.

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Newrez believes the lending business shouldn't just be about home loans - it should be about homeowners. That's why our employees get to know our customer's real needs, through final closing, and beyond.

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