A Home Equity Line of Credit (HELOC) is a financial product that allows homeowners to borrow against the equity they have built up in their property.
Home equity line of credit functions like a credit card, where borrowers can access funds up to a predetermined limit, and interest is only charged on the amount borrowed.
Individuals usually need to have a strong credit score, amount of equity in their home (typically at least 20%), and a stable income that demonstrates the ability to repay the loan.
HELOC provides a flexible source of funds that can be used for various purposes, such as home improvements, education expenses, debt consolidation, or unexpected financial needs.
Amount you can borrow with a HELOC is based on the appraised value of your home and the remaining balance on your mortgage. HELOCs can range from approximately $10,000 up to $1 million.
HELOC rates can vary depending on the lender, creditworthiness, LTV ratio, and prevailing market conditions. HELOCs typically come with variable interest rates, ranged from around 3% to 8%.
Once the draw period ends, HELOC enters the repayment phase. During this, you can no longer borrow from line of credit. The repayment period can vary, ranging from 10 to 20 years.