What to know about maxing out a HELOC, lending experts say

Before you get with a HELOC, marque definite you cognize the risks of maxing retired your enactment of credit. Getty Images/iStockphoto

Today's record-high location equity levels person made home equity lines of recognition (HELOCs) an particularly charismatic enactment close present for everything from location improvements to indebtedness consolidation. And arsenic high inflation continues to enactment unit connected household budgets, much homeowners are utilizing these borrowing tools to screen expenses oregon make a fiscal cushion for emergencies.

But portion HELOCs tin beryllium a utile and flexible tool, they travel with immoderate risks. And, due to the fact that these lines of recognition relation much similar a recognition paper than a lump-sum loan, allowing you to get repeatedly during the gully period (up to the HELOC limit), homeowners whitethorn privation to beryllium alert of the unintended consequences of maxing retired their HELOCs, successful particular.

To assistance you amended recognize these risks, here's what location equity experts accidental astir the downsides of maxing retired your HELOC, what to bash if you've already drawn the afloat magnitude from yours, and the alternatives you tin measurement if you're considering tapping much location equity.

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What to cognize astir maxing retired a HELOC, lending experts say

"When 1 of my borrowers is going to bash this benignant of financing and intends to gully connected the afloat enactment of recognition I ever person an aboriginal speech astir what the program volition beryllium to wage it disconnected astatine the extremity of the involvement lone play earlier it turns into an amortizing loan," says Sarah DeFlorio, vice president of owe banking astatine William Raveis Mortgage. 

Unlike home equity loans or different types of fixed-rate loans, HELOCs travel with variable involvement rates, meaning your rate, and truthful your monthly payment, could summation if rates ascent implicit clip — truthful maxing retired the recognition enactment tin beryllium risky. If your equilibrium is excessively ample and rates increase, your outgo could go unaffordable. But either way, a precocious HELOC outgo volition devour up much of your monthly currency flow, leaving little cushion leftover for unexpected expenses oregon emergencies.

"Someone who is maxing retired a HELOC is astatine hazard of putting themselves successful a sticky concern financially and whitethorn find that it besides impacts their quality to get retired of the loan, arsenic a little recognition people and higher debt-to-income ratio tin person a antagonistic interaction connected the presumption and products offered erstwhile applying for a aboriginal loan," accidental DeFlorio.

At best, maxing retired your HELOC equilibrium volition enactment unit connected your fund and ding your recognition people owed to precocious utilization, arsenic the much of your recognition enactment you use, the higher your recognition utilization volition be. At worst, maxing retired the recognition enactment could marque it impossible to marque your indebtedness payments. If that happens and you default, you could look imaginable foreclosure connected your home.

But if you've already maxed retired your HELOC, you inactive person an accidental to get backmost connected way and minimize the antagonistic interaction connected your finances.

"Focus connected getting backmost successful power without panicking," says Steven Glick, licensed owe serviceman and manager of owe income astatine HomeAbroad. "Start by building a repayment plan. Prioritize paying much than the minimum to spot distant astatine principal, possibly successful tiny chunks similar $5k astatine a clip if you tin plaything it, to little that utilization and boost your recognition score."

As you spot distant astatine your HELOC balance, Glick says it's important to support a adjacent oculus connected your relationship to spot immoderate changes that hap to your involvement complaint and minimum payment. You don't privation to place a alteration that could effect successful racking up precocious fees oregon penalties, oregon a displacement that could harm your credit.

If you're maxed out, you whitethorn besides privation to see ways to either refinance oregon restructure your HELOC. Refinancing to a location equity indebtedness oregon cash-out refinance could assistance you fastener successful a fixed complaint portion inactive utilizing your location arsenic collateral. Meanwhile, a personal loan oregon adjacent a 0% APR recognition card could assistance instrumentality immoderate of the hazard disconnected your home. But support your oculus retired for costly fees or, successful the lawsuit of a recognition card, a complaint spike astatine the extremity of your promotional period.

"If your home's worth has gone up (and with equity trends inactive affirmative but slowing successful 2025, it mightiness have), see asking your lender to summation the bounds oregon refinance the HELOC for amended terms," says Glick. "I've seen that escaped up breathing room."

Compare today's apical location equity borrowing rates and find the close 1 for you now.

HELOC alternatives to consider

"Depending connected your goals, a location equity indebtedness offers fixed payments and stability," says Sean Briscoe, manager of products and payments astatine Alliant Credit Union. "A cash-out refinance whitethorn beryllium a bully acceptable if you're looking to restructure your mortgage. 

Installment loans don't impact your recognition utilization successful the aforesaid mode HELOCs do, meaning there's typically little of an interaction connected your recognition score. The fixed payments besides supply much certainty for your budget, making it easier to program for some your contiguous obligations and your semipermanent extremity savings.

And, portion tapping into your equity offers the vantage of lower involvement rates compared to unsecured loans, galore of the different options won't enactment your location astatine risk.

"Other options see idiosyncratic loans for those with beardown credit," says Briscoe. "Each enactment comes with trade-offs, truthful it's important to measure what works champion for your fiscal situation. Think astir whether you request a lump sum up front, oregon ongoing entree to credit."

The bottommost line

A HELOC tin beryllium a almighty fiscal instrumentality erstwhile utilized correctly. But drafting the afloat magnitude tin bash much harm than good. Take a cautious look astatine your finances to determine what monthly payment you tin afford, but permission plentifulness of cushion to relationship for imaginable complaint increases successful the future. And, if you program to max retired our HELOC, oregon adjacent usage a important information of it, person a payoff program successful spot truthful you aren't stuck with an astronomical outgo erstwhile your repayment play begins.