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definition home equity line of credit

A home equity line of credit operates like a credit card with a credit limit in that one may borrow, through a debit card or a check, at one’s discretion, up to the maximum amount of the line of credit. The homeowner may use this credit line to finance other purchases or ventures.

Home equity lines of credit come with various terms, and many allow you to use the line for years without repaying principal. In our example, you could borrow up to the maximum $100,000 during the 10-year draw period, making interest payments on the balance.

A home equity line of credit (HELOC) allows homeowners to borrow cash to spend as they like, using their home equity as collateral. A HELOC functions as a second mortgage, with the borrower withdrawing and repaying funds on a more flexible schedule, and the government allowing a tax deduction for interest payments.

A home equity line of credit-or HELOC-is a lender-set revolving credit. a HEL or HELOC is secured by your home, meaning your property is.

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A home equity line of credit (often called HELOC, pronounced Hee-lock) is a loan in which the lender agrees to lend a maximum amount within an agreed period (called a term), where the collateral is the borrower’s equity in his/her house (akin to a second mortgage).

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The second type is called a home equity line of credit (HELOC). A HELOC has a variable interest rate and functions more like a credit card with an expiration date (often up to 10 years after the line.

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Home equity line of credit A home equity line of credit is a loan in which the lender agrees to lend a maximum amount within an agreed period, where the collateral is the borrower’s equity in his/her house.

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Learn the differences between home equity lines of credit and home equity loans and how they can help you achieve your financial goals.

Home Equity Loans What is the Difference Between a Home Equity Loan and a Home Equity Line of Credit? As more and more homeowners look to use their home equity as an option for low-interest financing, it can be confusing to know if a home equity loan or a home equity line of credit (HELOC) is the better option.