Answer
Jun 26, 2018 - 05:30 AM
A home equity line of credit, also known as a (HELOC), is a line of credit secured by your home that gives you a revolving credit line to use for large expenses or to consolidate higher-interest rate debt on other loans such as another property or credit cards. A HELOC often has a lower interest rate than some other common types of loans, and the interest may be tax deductible. I should mention that you should also consult your tax advisor regarding interest deductibility as tax rules may have changed.
How does a home equity line of credit work?
A home equity line of credit allows home or property owners to borrow 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 very much like a credit card balance. 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.
To qualify for a home equity line of credit, 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 normally 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. It's pretty much the same process as when you got your first mortgage. Many lenders want to make sure you are capable of repaying the loan.
How does a home equity line of credit work?
A home equity line of credit allows home or property owners to borrow 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 very much like a credit card balance. 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.
To qualify for a home equity line of credit, 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 normally 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. It's pretty much the same process as when you got your first mortgage. Many lenders want to make sure you are capable of repaying the loan.
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