Home Equity Line of Credit: the Facts

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When you need to borrow money to consolidate debts or purchase a big-ticket item, a home equity line of credit (HELOC) may help. A HELOC is a type of revolving credit secured by your home equity. This open-ended loan can be charged up or paid down during the loan term. The rate of interest fluctuates (typically every month).

Your lender will specify your credit limit (the maximum you may borrow) with the HELOC. In deciding your credit limit, your income, debts, credit history and other financial obligations will be taken into account. So that the lender is able to assess your home' present market value, you're going to need an appraisal on your property. Your credit limit will be based on all of your financial information, in addition to a fraction of your home's appraised market value, which is subtracted from the balance owed on your existing mortgage.