Home Equity Line of Credit: the Facts

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If you need some extra money to make a major purchase, renovate your house, or pay off a high interest credit card, a HELOC (home equity line of credit) may be just what you're looking for. A form of revolving credit, a HELOC is secured by your home equity. This is an open-ended of loan that may be paid down or charged up for the term of the loan, similar to a credit card. The rate of interest fluctuates (typically every month).

In a HELOC, the lending institution will approve you for a particular amount of credit - the maximum amount you are able to borrow at any given time with the agreement. In setting the credit limit, your income, debts, credit history and additional financial obligations will be taken into account. In order to ascertain your property's present market value, you'll need an appraisal on your property. Your credit limit will be determined on all of the above, as well as a fraction of your home's appraised value, which is subtracted from the balance owed on your present mortgage loan.