Home Equity Line of Credit: the Facts

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A home equity line of credit (HELOC) can be helpful when you are looking to borrow a lump sum to renovate your home, make a big purchase, or consolidate debt. A HELOC is a type of revolving credit secured by your home equity. This is an open-ended loan that may be paid down or charged up for the a set length of time, similar to a credit card. The loan interest typically changes every month

The lender will set your credit limit (the maximum you can borrow) in the HELOC. In setting the credit limit, your salary, outstanding debt, credit status and other monetary obligations will be reviewed. You are required to do an appraisal on your home to assess your home's present value. Your credit limit will be based on all of your financial information, in addition to a fraction of your home's appraised value, which is subtracted from the balance owed on your existing mortgage loan.