A home equity line of credit (HELOC), is a secured line of credit, where the equity of your home is used as security for a loan. Compared to an unsecured line of credit, with a HELOC, you are provided a much better rate. To obtain a HELOC you must have a minimum of 20% equity in your home. With a HELOC you pay only on what you obtain.
As your pay down the balance of your mortgage, the credit limit of your HELOC increases, making more funds available to you. The great thing about a HELOC is you only pay interest on what you take out. And when you repay what you borrowed, that amount is once again available for borrowing.
The interest on home equity loans are variable, meaning the interest rate differentiates based on the prime rate. The rate is always Prime plus a premium based on the lender.
In conclusion a Home Equity Line of Credit can be a powerful tool for you if you have more than 20% equity in your home and are looking to do anything from invest in another property to finance home renovations.
Everyone's situation is unique to their financial standing and needs. Book a free consultation with me to discuss your options.