A home equity line of credit is a type of loan that allows a homeowner to tap into the equity of their home to obtain cash for other uses. Home equity lines of credit are usually, but not always, second mortgages. A second mortgage or loan is a mortgage that a homeowner takes out on their home above and beyond their first mortgage. Most home equity lines allow an individual to borrow up to 85% of the appraised value of their home minus the amount they still owe on their first mortgage. A HELOC works similar to a revolving line of credit or credit card. It is set up for a maximum credit amount. A borrower does not typically have to take out any money up front. They can use the available credit to make purchases on an as-needed basis. Home equity lines typically have a draw period of five to ten years, followed by a repayment period of 10 to 20 years. For example, if a household has over consumed, and they’re having difficulty paying off creditors, a HELOC may be their best option for consolidating their debt. A Home Equity Line of Credit usually has a dramatically lower interest rate than traditional credit cards, so paying off high interest loans with a home equity line of credit can be a wise choice for many households.

Depending on the bank or lender, a home equity line of credit information can help to secure a loan for as much as 75-90% of home equity owned – namely, of the total value of the home minus any outstanding mortgages. A home equity line of credit is usually only possible for homeowners who have at least 10-20% equity in their home. To determine the limit of your HELOC, lenders will look at the appraised value of your home and start their calculations at 75% of those values. They then subtract the outstanding balance owed on the mortgage. If your home was appraised at $200,000, the lender would typically look at a maximum of $150,000 or 75 percent. If you had paid off $100,000 of your $180,000 loan, the lender would then deduct the remaining $80,000, which would mean you would have a maximum of $70,000 available on a HELOC if you had a very good credit history. Once approved for a home equity line of credit, you will most likely be able to borrow up to your credit limit whenever you want. Typically, you will use special checks to draw on your line. Under some plans, borrowers can use a credit card or other means to draw on the line. There is no shortage of lenders and offers for loans and lines of credit. Consider your needs, then shop around for a lender you can trust.

People open home equity lines of credit for many reasons. Some households are interested in remodeling, or adding on to their home. Other households open a Home Equity Line of Credit, because they want a financial safety-net. While others open a HELOC, because they need quick access to liquid assets. A variation of the home equity line of credit allows a homeowner to draw money against the home’s equity on an ongoing basis. Generally, a home equity line of credit features a variable interest rate, a specific time during which money may be withdrawn, and a repayment period following any withdrawal. The credit also revolves on a home equity line of credit: as soon as principal is repaid, it may be borrowed again. A Home Equity Line of Credit is available from most mortgage companies and banks. If you’re interested in pursuing a HELOC, you may want to consider contacting your local bank or Mortgage Company.

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