HELOC Basics for Signing Agents
A HELOC (home equity line of credit) uses the borrower's home equity as collateral for a revolving line of credit. Unlike a cash-out refinance, a HELOC doesn't pay off the existing mortgage — it sits on top of it as a second lien. The signing package is typically 40–70 pages, making it one of the shorter appointment types.
Key Documents in a HELOC Package
HELOC Agreement
The core document is the home equity line of credit agreement, which establishes the credit limit, the draw period (typically 5–10 years), the repayment period, and the variable interest rate structure. Borrowers often have questions about how the variable rate works. You can explain that it typically adjusts based on a published index like the Prime Rate, but you cannot advise them on whether the rate is favorable.
Deed of Trust or Mortgage
A HELOC requires a security instrument — typically a deed of trust that creates a lien on the property for the HELOC lender. This is notarized. Because it is usually a second lien (sitting behind the existing first mortgage), it may be labeled as a "second deed of trust" or "second mortgage."
Right of Rescission
This is critical: HELOCs on a primary residence have a 3-business-day right of rescission under federal law — the same as a refinance. The borrower signs the Notice of Right to Cancel, and you provide two copies. The rescission period begins on the later of: the signing date, delivery of the HELOC agreement, or delivery of the rescission notice. Explain this clearly, especially because the borrower cannot access the line of credit during the rescission period.
Initial Disclosure Statement
Required under TILA, this discloses the terms of the HELOC including the annual percentage rate (variable), how it may change, and the maximum possible rate. Borrowers who are surprised by the maximum rate cap have usually not read this document in advance.
FAQ
The package is smaller (fewer documents), the appointment is shorter, and the documents reflect a second lien rather than a first mortgage. Both have the right of rescission. The main procedural difference is that a HELOC package contains the HELOC agreement (a revolving credit document) rather than a promissory note for a fixed loan amount.
No. The 3-day right of rescission prevents the lender from disbursing funds or making the line of credit available until the rescission period has passed. If the borrower needs immediate access to funds, a HELOC is not the right product for that situation — but that is a question for their loan officer, not the signing agent.