HELOC is a secured loan, in which you are borrowing against the equity that has been built in your property. Typically, the lenders will let you borrow up to a set limit “For example 80 percent” of your home’s equity also known as “LTV or loan-to-value”. When you obtain a HELOC, you are given a draw period or length of time during which your line of credit will stay open.
HELOC payments are based on the interest which is set by the lender, the interest is calculated on the amount that you borrow only (For example $100,000 line, the amount used is $10,000, the interest charge is on $10,000 only). Any additional amount on top of your minimum will pay off a part of the principal, those funds go back to your line amount. When the draw period reaches maturity, you enter a repayment period, where you begin paying back the remaining principal on your HELOC, plus calculated interest.