How Does a HELOC Work?

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If you have a need for some extra money to make a large purchase, remodel your house, or pay off a high interest credit card, a HELOC (home equity line of credit) may be just what you are looking for. Using the equity in your home as collateral, a HELOC is revolving credit. This open-ended loan can be charged up or paid down during the loan term. The loan interest usually changes every month

With a HELOC, the lender will approve you for a predetermined amount of credit - the maximum amount you can borrow at any one time with the agreement. Your credit score, rate of pay, debt and other financial information can affect your credit limit. An appraisal is needed on your home to assess the property's current market value. Your property's up-to-date value, subtracted from your remaining mortgage loan balance will help to determine your specific credit limit.