What Is A Home Equity Line Of Credit

A home equity line of credit commonly abbreviated as a heloc is essentially a second mortgage that functions similarly to a credit card.

What is a home equity line of credit. Instead you re approved to borrow up to a certain amount of money which you can draw from over time. A home equity line of credit or heloc pronounced he lock is a loan in which the lender agrees to lend a maximum amount within an agreed period called a term where the collateral is the borrower s equity in their house akin to a second mortgage because a home often is a consumer s most valuable asset many homeowners use home equity credit lines only for major items such as education. A heloc or home equity line of credit is a line of credit similar to a credit card.

A home equity line of credit also known as a heloc is a line of credit secured by your home that gives you a revolving credit line to use for large expenses or to consolidate higher interest rate debt on other loans footnote 1 such as credit cards. You can draw from a home equity line of credit and repay all or some of. A home equity line of credit on the other hand doesn t involve borrowing a set amount.

What is a home equity line of credit. A home equity line of credit or heloc is a second mortgage that gives you access to cash based on the value of your home. In our example you could borrow up to the maximum 100 000 during the 10 year draw period making interest payments on the balance.

Home equity lines of credit come with various terms and many allow you to use the line for years without repaying principal. With this loan you can borrow up to a specific amount of your home equity and repay the funds slowly over time. A heloc often has a lower interest rate than some other common types of loans and the interest may be tax deductible.

A home equity line of credit or heloc is a second mortgage that uses your home as collateral to let you borrow up to a certain amount over time rather than an upfront lump sum.