What is a Home Equity Line of Credit (HELOC)?
A home is often your biggest investment, but it can also be one of your most valuable financial tools. A Home Equity Line of Credit (HELOC) lets you borrow against the equity you’ve built in your home, giving you access to funds when you need them most. Unlike a traditional loan with a fixed lump sum, a HELOC is a revolving line of credit similar to a credit card but typically with lower interest rates. This flexibility makes it a smart way for homeowners to manage large expenses or plan ahead for future needs.
Home Equity Loans & Lines of Credit
Take advantage of the equity you’ve built to finance a major purchase or to consolidate debt with a home equity loan or line of credit. With a home equity loan, you’ll have a competitive rate and predictable payments, great for a major purchase. A home equity line of credit gives you a variable rate and lets you access funds when you need to. Talk to your experienced, local TowneBank banker to decide if a home equity line of credit or home equity loan fits your needs.
How Does a HELOC Work?
How does a HELOC work? A HELOC loan is structured in two key phases:
1. Draw Period – This is the initial phase, often lasting 5 to 10 years. During this time, you can borrow funds as needed up to your approved limit. You’ll typically make interest-only payments during this period.
2. Repayment Period – Once the draw period ends, the repayment period begins. You’ll no longer be able to withdraw funds, and you’ll make payments toward both principal and interest until the balance is paid off.
What can a HELOC be used for? It can be used for almost any purpose. However, because your home is the collateral for the loan, it’s best to use a HELOC for expenses that have a strong financial return or are truly necessary. Here are some real-world situations where you can use the funds.
- Home Renovations: Upgrade your kitchen, add a bathroom, or invest in energy-efficient improvements.
- Debt Consolidation: Pay off higher-interest credit cards or personal loans with one lower-rate line of credit.
- Education Costs: Help cover tuition or other major educational expenses without draining your savings.
- Emergency Fund: Serve as a financial safety net for unexpected emergencies, such as medical bills or major home repairs that may not be covered by insurance.
- Starting a Business: Can provide startup money to fund a new business venture.
TowneBank also offers home equity loan options(Opens in a new window) if you prefer a fixed amount with a set repayment schedule.
Home Equity Line of Credit Rates & How to Calculate Them
HELOC rates are influenced by a variety of factors, both personal and economic, including market conditions that can affect interest rates and home values.
- Credit Score – Strong credit typically results in lower rates.
- Loan Amount & Equity – The more equity you have, the more favorable your terms may be.
- Market Conditions – Rates adjust based on broader financial markets and the Prime Rate.
Before applying, you can estimate your costs with TowneBank’s home equity loan calculators.
- HELOC Calculator(Opens in a new window)
- Home Equity Debt Consolidation Calculator(Opens in a new window)
These tools give you a clearer picture of what borrowing might look like in your situation
How to Qualify for a HELOC with TowneBank
Knowing the eligibility requirements helps you prepare before applying.
Eligibility Criteria
- Credit Score: A good credit history improves your chances of approval.
- Home Equity: You’ll typically need at least 15–20% equity in your home.
- Income & Debt-to-Income Ratio (DTI): This is where lenders like TowneBank will look at your ability to repay the line of credit. Your DTI ratio compares your monthly debt to your gross monthly income.
Application Process
- Meet with a TowneBank representative to review your financial goals.
- Submit an application. You’ll provide basic financial documents, including proof of income and property information.
- TowneBank reviews and evaluates your eligibility and sets your credit limit.
- Once approved, you’ll have access to funds and can draw on your HELOC as needed.
HELOC Application: Get Started with TowneBank
Start your HELOC journey today! A HELOC can give you financial breathing room and flexibility, and getting started is simple. Whether you’re planning renovations, consolidating debt, or preparing for future expenses, TowneBank is here to guide you through the process.
- Check Your HELOC Eligibility Today with our online tools
- Start Your Application Now through our secure portal
- Or connect directly with a TowneBank loan officer for personalized guidance
Start Your HELOC Application(Opens in a new window) and see how your home’s equity can work for you.
Subject to credit approval. Property insurance required. TowneBank NMLS# 512138
* The rate is variable and the maximum Annual Percentage Rate (APR) is 16% or as applicable by law. The Prime Rate is a variable rate based on the Prime Rate published from time to time in the Wall Street Journal. Floor rate applies.
^ If the borrower closes the line of credit within the first 24 months of opening, the bank will add any closing costs paid on the borrower's behalf to the outstanding balance for our reimbursement. Total closing costs generally range from $525 - $1,750.
This offer is available only on owner-occupied or secondary single-family residential real property in cities and counties served by TowneBank offices in Virginia and North Carolina. TowneBank must obtain a valid first or second lien position on the collateral, and all owners of the collateral must sign the documents. Borrow up to 80% of the home's value. Available equity depends on balance of other loans tied to the property.
**The LineLock feature is available to all equity line of credit (“Credit Line”) borrowers in products that are not rate-tiered. Any portion locked in to a Fixed Rate Advance will enjoy the fixed rate established at the time of conversion for the requested duration of the LineLock. Fixed Rate Advances may include credit line draws made in the thirty calendar days prior to a LineLock request. LineLocks are not available during any period when the Credit Line is placed in stop-draw status, and cannot exceed the maturity date of the Credit Line.
Rate Determination. The fixed rate will be determined as follows: the Annual Percentage Rate (APR) for a Fixed Rate Advance will be the highest prime rate published in the Wall Street Journal that is in effect on the date of conversion plus or minus a margin between 0% and 5% added to the value of the index. The maximum APR on a Fixed Rate Advance will never exceed 16% or the maximum allowed by law, whichever is less. Periodically, a special Fixed Rate Advance introductory rate may be offered to apply to any Fixed Rate Advance that meets the criteria for the promotional offer. Such an introductory rate will be based on the above index plus or minus a margin set by the Bank. You should contact a TowneBank branch office for the APR currently in effect.
Complete Election Form. In order to exercise the option to convert to a fixed APR, you must sign and return to us an Equity Line of Credit Conversion Election Form (“Election Form”). The Election Form will set forth the principal amount, fixed APR, term (in months), the number of monthly payments and the amount of each monthly payment applicable to the Fixed Rate Advance.
Minimum Monthly Payments. At the time you exercise the option to convert to a fixed APR, we will determine a minimum monthly payment applicable to that Fixed Rate Advance in equal monthly installments of principal and interest over the term of the Fixed Rate Advance. If you have more than one Fixed Rate Advance outstanding, you will have to make minimum monthly payments with respect to each Fixed Rate Advance. The minimum monthly payments due with respect to Fixed Rate Advances will be in addition to the Minimum Payment due with respect to any balance under your Credit Line subject to a variable APR.
Interest Rate Risk Notification. Each LineLock will receive a fixed APR for a specified term as designated on your signed Election Form. Outstanding Credit Line balances that are not fixed under a LineLock have a variable APR. Due to fluctuating market conditions, it is possible that the variable APR on your Credit Line may be less at certain times than the fixed APR on your LineLock(s). It is possible to convert LineLock advances back to revolving interest-only balances at any time without a fee.