What is a Home Equity Line of Credit (HELOC)

Local Mortgage Information for Your Area

Mortgage Tools

Search Articles

What is a Home Equity Line of Credit (HELOC)?

Another of the two kinds of second mortgages (the other being a home equity loan), this one creates a line of credit based on a home's equity.

Like a credit card, a credit limit is established. As the borrower uses the credit to get cash, goods, and services, those amounts must be paid back with interest (which can be tax deductible), within a scheduled time (term).

However, a HELOC is not a credit card, despite their similarities. A HELOC works like a credit line. Most lines feature an "open" or "advance" period where you can borrow money, followed by a "repayment" period where your access is closed off, and any money you still owe must be repaid. However, there are some which are truly open-ended and they do not have a fixed term, but can last for as long as you own your home. HELOC's are almost always variable-rate tied to the Prime Rate plus some margin, with at least a lifetime cap on rate movements. Next: Would you like to experiment with a home equity calculator or to be matched with up to five home equity and second mortgage lenders?

The content provided above (the "Content") is supplied in good faith using references and sources deemed reliable, however it is published strictly on an "as-is" basis. Nextag, Inc., on behalf of itself and its affiliates hereby disclaims any and all express or implied warranties to the maximum extent permitted by law. Despite our good faith efforts we cannot provide any assurance that the Content is accurate or error free, or up to date. We disclaim any obligation to update the Content. The Content is provided for informational purposes only and is not to be construed as financial or legal advice. Everyone's financial circumstances are unique. You are urged to consult multiple informational sources and a professional advisor before making any decisions affecting your personal finances. For more information please consult our website Terms of Use which also apply.