How Does a HELOC Work?

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If you need to borrow money to consolidate funds or purchase a big-ticket item, a home equity line of credit (HELOC) might help. Using the equity in your home as collateral, a HELOC is revolving credit. This open-ended loan may be be charged up or paid down during the loan term. The loan interest rate typically changes every month

In a HELOC, your lender will approve you for a specific amount of credit - the highest sum you can borrow at any given time. In determining the credit limit, your salary, outstanding debt, credit status and other monetary obligations will be considered. An appraisal will be required on your home to assess the property's current market value. Your home's up-to-date value, subtracted from your remaining mortgage balance will help to determine your specific credit limit.