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How does a home equity line of credit work?

By Bob Millaway, South Jersey Community Expert & REALTOR®

A home equity line of credit (HELOC) lets you borrow against the equity in your home, up to a set limit, similar to a credit card. You draw funds as needed during the draw period, typically 10 years, and pay interest only on what you use. After the draw period, you repay the balance over the remaining term. HELOCs typically have variable rates and are secured by your home, so default risks foreclosure.

Why It Matters

A HELOC offers flexible access to cash for home improvements, debt consolidation, or emergencies, but it uses your home as collateral. Use it thoughtfully.

Related Questions

What should I look for during an open house? How much should I save for a down payment? What are closing costs and how much are they? What loan options are available for first-time buyers? What questions should I ask my real estate agent when buying?

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