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If you need some extra cash to make a large purchase, remodel your home, or pay the balance on a high interest credit card, a HELOC (home equity line of credit) might be just what you need. A HELOC is a form of revolving credit secured by your home equity. This open-ended loan may be be charged up or paid down during the set term of the loan. The rate of interest changes (usually every month).
Your lender will set your credit limit (the highest amount you can borrow) with the HELOC. In setting the credit limit, your income, debts, credit status and any other monetary obligations will be considered. You are required to have an appraisal to determine your home's current market value. Your credit limit will be determined on all of your financial information, in addition to a fraction of your property's appraised market value, which is then subtracted from the balance owed on your existing mortgage.