What is a HELOC?

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When you need some extra cash to make a big purchase, remodel your house, or pay the balance on a high interest credit card, a HELOC (home equity line of credit) may be just what you need. A HELOC is a type of revolving credit secured by your home equity. This open-ended loan may be be charged up or paid down during the set term of the loan. The rate of interest fluctuates (usually every month).

The lender will set your credit limit (the maximum you may borrow) with the HELOC. Your credit status, rate of pay, debts and various other financial information can affect your credit limit. So that the lender can assess your property's current market value, you will need an appraisal on your property. Your credit limit will be set on all of your financial information, in addition to a percentage of your property's appraised market value, which is subtracted from the balance owed on your existing mortgage.