What is a HELOC or Home Equity Line of Credit?
A home equity line of credit, also known as a HELOC, is a line of credit that is secured by your home. The HELOC gives you a revolving credit line to use for large expenses or to consolidate higher-interest rate debt on other loans such as credit cards. A HELOC often has a lower interest rate than some other types of loans, and the interest may be tax deductible. Please consult your tax advisor regarding interest deductibility as tax rules may have changed.
How a HELOC works
With a HELOC, you are borrowing against the available equity in your home and the house is used as collateral for the line of credit. As you repay your outstanding balance, the amount of available credit is replenished – much like a credit card. This means you can borrow against it again if you need to, and you can borrow as little or as much as you need throughout your draw period (typically 10 years) up to the credit limit you establish at closing. At the end of the draw period, the repayment period (typically 20 years) begins.
Qualifying for a HELOC
To qualify for a HELOC, you need to have available equity in your home, meaning that the amount you owe on your home must be less than the value of your home. You can typically borrow up to 85% of the value of your home minus the amount you owe. Also, a lender generally looks at your credit score and history, employment history, monthly income and monthly debts, just as when you first got your mortgage.
* * APR = Annual Percentage Rate. Rates are variable and subject to change based on market conditions. A floor rate of 5.00% APR applies. All loans subject to credit approval and membership eligibility. Additional terms and conditions may apply. NMLS#410584