Home Equity Line of Credit (HELOC)

A Equity/">Home Equity Line of Credit (HELOC) is a Credit/">Revolving Credit line secured by the Equity in a borrower’s home. It allows homeowners to borrow Money against the value of their property, up to a certain limit, using their home as Collateral. The Credit line can be used for various purposes, such as home improvements, Debt Consolidation, or major expenses. Interest is typically variable and may be tax-deductible.

For example, if a homeowner has a property valued at $300,000 and owes $200,000 on their mortgage, they have $100,000 in Equity. A lender might offer a HELOC that allows them to borrow up to 80% of their Equity, or $80,000.

In a case where a homeowner wants to renovate their kitchen, they could draw $30,000 from their HELOC. They would then repay that amount over time, making monthly interest payments during the draw period, which typically lasts 5-10 years. After that, the repayment period begins, where they start paying back both the principal and interest.