HELOC on a Paid-Off House: Can I Get One?

It’s normal to wonder whether you can get a HELOC on a house that’s already paid off. After all, HELOCs and home equity loans are often called second mortgages—so how can you get one if there’s no first mortgage in place?

The good news: you can. In fact, getting a HELOC on a paid-off home is often simpler because you have 100% equity to borrow from.

Why homeowners get HELOCs

Balances on HELOCs rose by $6 billion just in the first three months of 2025, according to the Federal Reserve Bank of New York. That was the 12th consecutive quarterly increase. So, you’ll be in good company if you get one.

Any homeowner with a need for cash might look at a HELOC. While there are typically no restrictions on how you use the funds, it’s wise to reserve this type of borrowing for meaningful expenses.

Here are some of the most common reasons homeowners get HELOCs:

• They want to enhance, repair or add to their home.
• Their child or grandchild is going to college, and they want to ease their path financially.
• Their emergency fund is low, and they want a backup for unexpected expenses like medical bills.
• They’re consolidating high-interest debt.
• They’re planning for retirement.

In many cases, the interest on HELOC funds used for home improvements may be tax-deductible. However, it’s best to consult a tax professional to confirm how the rules apply to your situation.

Read I Own My House Outright and Want a Loan: Is It Possible? | 2025

Real-life examples of a HELOC on a paid-off house

James and Elizabeth — home improvement

Elizabeth’s parents are seniors and are beginning to encounter health issues. She and James agree that mom and pop need extra care and attention, and decide to build a 600-square-foot accessory dwelling unit (ADU) for them in their backyard.

Typically, these can come in at $60,000-$180,000, and the couple settles on a $100,000 budget. They apply for a $100,000, 30-year HELOC and are offered a rate of 8.94% (variable). At that rate, their initial minimum monthly payments are $800.

After 10 years of minimum payments, they’ll enter the repayment phase of their HELOC. Then, they’ll have 20 years to pay down the balance, plus interest, or refinance their HELOC.

Michael and Jennifer — Grandchild off to college

Michael and Jennifer have only one grandchild, and she’s the apple of their collective eye. They were so proud when she was accepted for a four-year course at an out-of-state college — until they discovered the average cost was $45,708. They couldn’t bear to imagine Emily starting her adult life with such a burden, so they applied for a $50,000 HELOC.

After applying to multiple lenders, they chose a 30-year one, similar to James and Elizabeth’s, at 9.52% (variable). Their initial monthly payments were $420.

David and Lisa — Restore their emergency fund

David and Lisa have always been smart with their money. They carry almost no debt and have excellent credit scores, which helped them qualify for a $40,000 HELOC at a 7% interest rate.

At first, they didn’t borrow anything—they just liked having the credit line available as a financial safety net. But after some unexpected medical expenses drained their emergency fund, they wanted extra peace of mind in case more surprises came up.

Later, their financial advisor suggested putting an extra $10,000 into their retirement account to boost their long-term savings. To take advantage of that opportunity, they used their HELOC to fund the contribution.

Now, they’re paying back that $10,000 over five years with monthly payments of about $143. Their plan is to be debt-free by the time they retire in five years. After it’s paid off, they’ll still have access to the full $40,000 line for another five years—just in case they need it again. If they don’t use it, they can simply close the HELOC with no additional payments.

What to watch out for with a HELOC

Nobody should borrow a serious sum over a long period without taking time to understand what they’re getting into. HELOCs are no more scary than other types of loans, but there are things to be aware of.

• A HELOC is secured on your home. If you fall too far behind on payments, you risk foreclosure.
• You can probably find a fixed-rate HELOC, but many come with variable rates. That means your interest rate and monthly payments will rise and fall in line with general interest rates.
• Compare your multiple loan offers carefully and watch out for fees, closing costs and minimum draw requirements.
• The two-phase (draw and repayment) structure of a HELOC isn’t intuitive, so read up on it.

Mainstream HELOCs don’t come with surprises or hidden catches; you just need to know the basics.

HELOC on a paid-off house: The bottom line

A HELOC on a paid-off house lets you tap into the equity you’ve spent years building—without selling, refinancing, or dipping into your savings. Whether you want a lump sum or a flexible line of credit, it’s all possible with your home’s value behind you. Just be sure to have a smart repayment plan in place.

Ready to see what’s out there? Start exploring lenders below and find the right fit for your financial goals.