Home Equity Line of Credit: the Facts

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If you need some extra cash to make a large purchase, renovate your house, or pay the balance on a high interest credit card, a HELOC (home equity line of credit) may be just what you need. A HELOC is a type of revolving credit secured by the equity in your home. This is an open ended loan that can be paid down or charged up for the term of the loan, much like a credit card. The interest rate can fluctuate (generally monthly).

The lender will set your credit limit (the highest amount you may borrow) in the HELOC. Your credit score, rate of pay, debts and other financial circumstances will affect your credit limit. An appraisal is required on your house to assess the property's present market value. Your credit limit will be determined on all of your financial information, in addition to a fraction of your property's appraised value, which is then subtracted from the balance owed on your present mortgage.