Home Equity Line of Credit (HELOC)

One of the biggest perks of home ownership is to build equity in your house. You can use that equity to secure low cost funds in the form of a second mortgage, either a one time loan or a home equity line of credit (HELOC). There are advantages and disadvantages to each of these form of credit, so it is important to understand their pros and cons before proceeding.

HELOCs are like a Visa or a Master Card against the Equity of your house. Home equity can be a great source of value for home owners to access cash for renovations or an alternative to debt repayment source.

A home equity loan comes as a lump-sum cash often with a fixed interest rate. A home equity line of credit is a revolving source of funds much like a credit card that you access as you choose. If you have a home equity line of credit, repayment works like a credit card. You draw from the line of credit until the credit line amount (just like credit limit in a credit card) is reached. Typically you are only required to make interest payments during the draw period, which tends to be 10 or 15 years.