How Does a HELOC Work


What is a HELOC (He-Lock) and how does it work?

That is a good question. The HELOC acronym stands for Home Equity Line of Credit. It is a second mortgage or a first mortgage if your house is paid off, on the home that lets you borrow against the equity that you have in your home. The borrower can advance funds from the HELOC whenever they need it and repay it back to the bank in one lump sum or just pay the accrued interest each month. Please remember that you are using your home as collateral for the loan.

The Home Equity Line of Credit is a credit that is available for you to use whenever you need it. You can advance funds or borrow funds from the HELOC, pay it back, and reborrow the money again and again. At Frontier Bank, the HELOC has a revolving period of ten (10) years. This is a long period of time to have funds available to use when every you need it. You can use the funds to complete improvements on your home, which would increase the value of your home. It could also be used as an emergency fund, such as replacing a major appliance in your home. The borrower needs to use the HELOC wisely. Sometimes people use a HELOC to consolidate credit card debts. That is fine but if you don’t plan to change your spending habits you could create a bigger issue and could adversely affect your ability to repay all your debts.

When you apply for your HELOC, you would meet with one of the Frontier Bank mortgage lenders. Go to, hover over Lending, and click on Meet our Lenders to find one of our mortgage lenders. Through the interview and application process, the lender will explain the lending standards for the HELOC and the loan amount that you can qualify. Basic requirements at Frontier Bank are:

  • A minimum credit score of 650 or higher
  • A debt-to-income ratio of 38% or less
  • Maximum loan to value of 90% or less

The interest rate on a HELOC is variable and is based upon an index plus a margin. The higher your credit score the lower the interest rate on your HELOC. A HELOC at Frontier Bank is set up with two (2) phases, a draw period of ten (10) years and a repayment period of ten (10) years. If you want to see what the monthly payments would be on your HELOC when it is in the repayment period, you can go to, hover over Personal, then click on Financial Calculators. You can use the mortgage calculator to determine what your monthly payment would be over ten years.

As the borrower, you are in control of how you use the funds available on HELOC. You can access the funds available in the HELOC through Online Banking and transfer funds directly to your Frontier Bank checking account. Frontier Bank will also set up an automatic advance to transfer money from your Frontier Bank HELOC to your Frontier Bank checking account as a form of overdraft protection. This feature works like this. If your checking account becomes overdrawn, money would be advanced on the HELOC and deposited in your checking account. That way you can avoid an overdraft fee.

HELOC’s (Home Equity Lines of Credit) are a great way to unlock the equity in your home to provide funds you need to complete improvements to your house, take care of planned or unexpected expenses, or consolidate debt. Contact one of our Frontier Mortgage lenders at Frontier Bank for a “No Fee” Home Equity Line of Credit.


David Lantz

David Lantz
Senior VP of Ag Banking
Phone: 712-472-2537 




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