A HELOC allows you to borrow against the equity in your home. Equity is the difference between what you owe on your mortgage and what your home is worth. Say your home is worth $400,000 and you owe $200,000 on your mortgage. That means you have $200,000 in equity.
You might then qualify for a HELOC of $170,000. With a HELOC, though, you don't have to borrow the full $170,000. You might borrow $40,000 for a major kitchen remodel. If that's all you borrow, then that's what you pay back, with interest. You'll pay back what you borrow with regular monthly payments.
Homeowners like HELOCs because they come with flexibility: You only borrow what you need. That's how this borrowing vehicle dif...