Home Equity Line of Credit: the Facts

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A home equity line of credit (HELOC) can be useful when you are hoping a lump sum to renovate your home, make a big purchase, or consolidate debt. A kind of revolving credit, a HELOC is secured by the equity in your home. This is an open-ended loan that can be paid down or charged up for the a set length of time, similar to a credit card. The interest rate can fluctuate (usually every month).

Your lender will set your credit limit (the biggest amount you can borrow) in the HELOC. In setting your credit limit, your pay-rate, outstanding debt, credit history and additional monetary obligations will be taken into account. In order to ascertain your house's present market value, you'll need an appraisal on your home. Your credit limit will be set considering all of your financial information, in addition to a percentage of your property's appraised value, which is then subtracted from the balance owed on your present mortgage.