What to know about maxing out a HELOC, lending experts say
Today's record-high home equity levels have made home equity lines of credit (HELOCs) an especially attractive option right now for everything from home improvements to debt consolidation. And as high inflation continues to put pressure on household budgets, more homeowners are using these borrowing tools to cover expenses or create a financial cushion for emergencies.
But while HELOCs can be a useful and flexible tool, they come with some risks. And, because these lines of credit function more like a credit card than a lump-sum loan, allowing you to borrow repeatedly during the draw period (up to the HELOC limit), homeowners may want to be aware of the unintended consequences of maxing out their HELOCs, in particular.
To help you better understand these risks, here's what home equity experts say about the downsides of maxing out your HELOC, what to do if you've already drawn the full amount from yours, and the alternatives you can weigh if you're considering tapping more home equity.
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What to know about maxing out a HELOC, lending experts say
"When one of my borrowers is going to do this type of financing and intends to draw on the full line of credit I always have an early conversation about what the plan will be to pay it off at the end of the interest only period before it turns into an amortizing loan," says Sarah DeFlorio, vice president of mortgage banking at William Raveis Mortgage.
Unlike home equity loans or other types of fixed-rate loans, HELOCs come with variable interest rates, meaning your rate, and therefore your monthly payment, could increase if rates climb over time — so maxing out the credit line can be risky. If your balance is too large and rates increase, your payment could become unaffordable. But either way, a high HELOC payment will eat up more of your monthly cash flow, leaving less cushion leftover for unexpected expenses or emergencies.
"Someone who is maxing out a HELOC is at risk of putting themselves in a sticky situation financially and may find that it also impacts their ability to get out of the loan, as a lower credit score and higher debt-to-income ratio can have a negative impact on the terms and products offered when applying for a future loan," say DeFlorio.
At best, maxing out your HELOC balance will put pressure on your budget and ding your credit score due to high utilization, as the more of your credit line you use, the higher your credit utilization will be. At worst, maxing out the credit line could make it impossible to make your loan payments. If that happens and you default, you could face possible foreclosure on your home.
But if you've already maxed out your HELOC, you still have an opportunity to get back on track and minimize the negative impact on your finances.
"Focus on getting back in control without panicking," says Steven Glick, licensed mortgage officer and director of mortgage sales at HomeAbroad. "Start by building a repayment plan. Prioritize paying more than the minimum to chip away at principal, maybe in small chunks like $5k at a time if you can swing it, to lower that utilization and boost your credit score."
As you chip away at your HELOC balance, Glick says it's important to keep a close eye on your account to spot any changes that occur to your interest rate and minimum payment. You don't want to overlook a change that could result in racking up late fees or penalties, or a shift that could harm your credit.
If you're maxed out, you may also want to consider ways to either refinance or restructure your HELOC. Refinancing to a home equity loan or cash-out refinance could help you lock in a fixed rate while still using your home as collateral. Meanwhile, a personal loan or even a 0% APR credit card could help take some of the risk off your home. But keep your eye out for costly fees or, in the case of a credit card, a rate spike at the end of your promotional period.
"If your home's value has gone up (and with equity trends still positive but slowing in 2025, it might have), consider asking your lender to increase the limit or refinance the HELOC for better terms," says Glick. "I've seen that free up breathing room."
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HELOC alternatives to consider
"Depending on your goals, a home equity loan offers fixed payments and stability," says Sean Briscoe, director of products and payments at Alliant Credit Union. "A cash-out refinance may be a good fit if you're looking to restructure your mortgage.
Installment loans don't affect your credit utilization in the same way HELOCs do, meaning there's typically less of an impact on your credit score. The fixed payments also provide more certainty for your budget, making it easier to plan for both your immediate obligations and your long-term goal savings.
And, while tapping into your equity offers the advantage of lower interest rates compared to unsecured loans, many of the other options won't put your home at risk.
"Other options include personal loans for those with strong credit," says Briscoe. "Each option comes with trade-offs, so it's important to evaluate what works best for your financial situation. Think about whether you need a lump sum up front, or ongoing access to credit."
The bottom line
A HELOC can be a powerful financial tool when used correctly. But drawing the full amount can do more harm than good. Take a careful look at your finances to determine what monthly payment you can afford, but leave plenty of cushion to account for possible rate increases in the future. And, if you plan to max out our HELOC, or even use a substantial portion of it, have a payoff plan in place so you aren't stuck with an astronomical payment when your repayment period begins.