The loan itself

How HELOC interest works

Daily accrual

Each day's interest is that day's balance multiplied by the annual rate divided by 365. Those amounts are summed and billed once a month.

Because there is no amortization schedule, anything you pay above the interest charge reduces the balance directly and immediately.

The variable rate

The rate is a published index plus a margin set in your note. The margin is fixed for the life of the line. The index moves, and when it does the rate moves with it.

On the Luminate Smart Equity Loan the index is SOFR — the Secured Overnight Financing Rate. SOFR is a backward-looking measure: it reflects what overnight borrowing actually cost. Treasury-based indexes are forward-looking and price in what markets expect the Federal Reserve to do, which means a Treasury-indexed line can move before anything has actually happened.

That is a difference in timing, not a claim that one index is calmer than another. Over the last five years the two have moved by very similar amounts month to month. There is no such thing as a best index.

What this means for planning

A variable rate is the central trade-off of the whole strategy. It should be planned for rather than argued away.

The practical question is not whether the rate will move — it will — but whether your surplus is large enough to absorb the movement without the plan collapsing.