Home Equity Line of Credit: the Facts

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If you need to borrow money to consolidate funds or buy a big-ticket item, a home equity line of credit (HELOC) can be useful. A kind of revolving credit, a HELOC is secured by your home equity. This open-ended loan may be be charged up or paid down over the loan term. The rate of interest changes (generally every month).

The lender will set your credit limit (the largest amount you can borrow) in the HELOC. Your credit history, salary, debts and various other financial information can affect your credit limit. So that the lender is able to assess your property's current market value, you're going to need an appraisal on your property. Your credit limit will be based considering all of your financial information, in addition to a percentage of your home's appraised market value, which is subtracted from the balance owed on your existing mortgage.