I’m Justin Leach, a mortgage broker in Santa Barbara. In this series, we’ve followed a buyer from getting pre-approved all the way to closing day. Once you own your home, a new question comes up: how can you put the equity you’ve built to work?
For many Santa Barbara homeowners, the answer is a home equity line of credit, or HELOC. It lets you borrow against your home’s value without giving up your current mortgage. If you’re thinking about a remodel, an ADU, or your next purchase, call or text me at 805-456-2256.
What is a HELOC?
A HELOC lets you “borrow, spend, and repay as you go, using your home as collateral,” according to the Consumer Financial Protection Bureau. It works in two stages:
- The draw period. You can borrow what you need, when you need it, up to your credit limit.
- The repayment period. When the draw period ends, you stop borrowing and pay back the balance.
You only pay interest on what you actually use, which makes a HELOC flexible for projects that happen in stages.
HELOC vs. other options
| HELOC | Home equity loan | Cash-out refinance | |
|---|---|---|---|
| How you get the money | A line of credit you draw from as needed | One lump sum | One lump sum |
| Interest rate | Usually variable | Usually fixed | Fixed or adjustable |
| Your current mortgage | Stays in place | Stays in place | Replaced by a new, larger loan |
| Often a good fit for | Projects paid in stages, like remodels or ADUs | One-time costs with a set amount | Owners who want one loan, or who want to change their rate or term |
If you have a first mortgage you’d like to keep, a HELOC or home equity loan lets you borrow without touching it (CFPB).
Why it fits Santa Barbara
The median Santa Barbara home sold for about $1.88 million in September 2026 (Redfin). Homeowners who bought years ago may have built significant equity, and a HELOC is one of the most flexible ways to use it without selling or refinancing the whole home.
Financing an ADU
Accessory dwelling units are one of the most popular reasons Santa Barbara homeowners tap their equity, whether for family, guests, or rental income. Local governments are making them easier to build:
- Santa Barbara County issued 918 ADU building permits from 2018 to 2024, more than the 809 permits it issued for detached single-family homes. In April 2026, the county launched free pre-approved ADU plans with a fixed permitting fee of $4,200 for unincorporated areas (Santa Barbara Independent).
- The City of Santa Barbara launched its own Pre-Approved ADU Program in May 2025 (City of Santa Barbara).
Because ADU costs come in stages, from design and permits to construction, a HELOC’s draw-as-you-go structure is often a natural fit.
Other common uses
- Remodels and upgrades, like a kitchen, roof, or fire hardening.
- Paying off high-interest debt, like credit cards or personal loans (more on that below).
- Buying your next home before selling your current one.
- A financial cushion you can draw on if you need it.
Whatever the use, borrow with a clear plan to repay. Your home secures the line.
Paying off high-interest debt
Some homeowners use a HELOC to pay off credit cards or other high-interest loans. Because a HELOC is secured by your home, its rate is often lower than a credit card’s, and rolling several balances into one line can make your payments simpler to manage.
It’s a decision to make carefully. The CFPB calls using home equity to consolidate credit card debt “risky,” because “if you don’t pay back the loan, you could lose your home in foreclosure.” It also warns that taking on new debt to pay off old debt “may just be kicking the can down the road” unless spending changes too. And interest on money used this way generally isn’t tax deductible.
If you’re considering it, we’ll look at the full picture with you: your balances, your budget, closing costs, and how a variable rate could change your payment, so you can see whether consolidating actually makes sense.
What lenders look for
| Requirement | What lenders typically review |
|---|---|
| Equity | Your home’s value minus what you owe. Lenders let you borrow up to a set share of your equity, and limits vary. |
| Credit | Your credit history and score |
| Debt-to-income ratio | Your current mortgage, the new line, and other debts compared with your income |
| Income | Pay stubs and tax returns, or other documentation if you’re self-employed |
| Home value | An appraisal or other valuation of the property |
Higher-value Santa Barbara homes add another wrinkle. Line limits vary by lender, so if you need a larger line, it pays to compare lenders.
Taxes and your HELOC
Interest on a HELOC is generally deductible only if you use the money to buy, build, or substantially improve the home that secures it (IRS). The 2025 federal tax law made that rule permanent (CPA Practice Advisor). That means an ADU or major remodel may qualify, while paying off a car may not. Talk with your tax advisor about your situation.
Know the risks
- Your payment can change. HELOCs typically have variable rates, so payments can rise even if you don’t borrow more.
- Repayment can be bigger. When the draw period ends, you may need to repay the balance over a set period, or in some cases in one balloon payment.
- Your home is the collateral. The CFPB warns that if you can’t repay on schedule, you could lose your home.
How we can help
- We look at your goals first, whether that’s an ADU, a remodel, or your next purchase.
- We compare your options, including a HELOC, a home equity loan, or a cash-out refinance, and show you the trade-offs.
- We shop lenders for you through access to more than 100 lenders via Xpert Home Lending, which matters for higher-value homes and self-employed income.
- We walk you through every term, including the draw period, repayment, and how your payment can change.
Frequently asked questions
Can I get a HELOC on a high-value home?
Yes. Line limits vary by lender, so comparing lenders matters most for higher-value Santa Barbara homes.
Do I need to refinance my current mortgage?
No. A HELOC sits behind your existing mortgage, so your first loan stays in place.
Can I use a HELOC to build an ADU?
Yes. It’s a common choice because you can draw funds as each stage of the project needs them.
Can I use a HELOC to pay off credit cards?
Yes, and many homeowners do. Just keep in mind that the debt becomes secured by your home, so it’s important to have a clear plan to pay it down.
Is HELOC interest tax deductible?
Generally only if the money is used to buy, build, or substantially improve the home that secures it. Check with your tax advisor.
Do you only work in Santa Barbara?
No. I work throughout Santa Barbara County and all of California, and I’m also licensed in Arizona and Texas.
