A Home-Equity Line of Credit (HELOC) allows home-owners to borrow cash to spend as they like, using their home-equity as collateral. HELOCs function as a second mortgage, with the borrower withdrawing and repaying funds on a more flexible schedule, and the government allowing a tax deduction for interest payments. Unlike traditional first or second mortgages, a HELOC interest rate is not fixed; the rate varies from month to month with the prime rate. As with all loans based on the value of the home, if the borrower can’t make his payments, the lender may foreclose on his home.