Home Equity Line of Credit: the Facts

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When you need some extra cash to make a big purchase, remodel your home, or pay off a high-interest credit card, a HELOC (home equity line of credit) might be just what you are looking for. A form of revolving credit, a HELOC is secured by the equity in your home. This open-ended loan may be be charged up or paid down during the set term of the loan. The interest rate can fluctuate (usually monthly).

The lender will set your credit limit (the maximum you may borrow) in the HELOC. In deciding your credit limit, your pay-rate, outstanding debt, credit status and other financial obligations will be considered. You are required to schedule an appraisal to assess your home's current value. Your credit limit will be determined considering 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 current mortgage loan.