Home Equity Line of Credit | HELOC | Home Equity Loan | information, tips and advice
Home Equity Line of Credit, often referred to as Home Equity Loan or HELOC. Information, tips and advice from the largest free repository of free HELOC articles and content.
HELOC - Home Equity Line of Credit information, tips and advice.
A Home Equity Line of Credit, also referred to as HELOC, is a type of loan in which the collateral is the borrower's equity in his/her house. Much like a credit card, the borrower does not take out the entire loan amount up front, but uses the credit line to borrow certain amounts up to the credit limit specified.
Homeowners need to be aware that the interest rate on a HELOC is usually variable and tied to a certain index such as prime rate. The lender then adds his margin to the index. This means that the interest rate, and thus the monthly payments, will most probably change over time.
During a "draw period" of 5 to 25 years the funds can be borrowed as needed. The monthly payments will usually need to cover at least the interest of the borrowed amount(s). It is then up to you how much of the principal loan amount you want to repay. At the end of the above mentioned draw period the full loan amount borrowed is due either in a lump-sum or by following an amortization schedule.
Home Equity Line of Credit loans have become very popular during recent years, for several reasons. They are often considered to be a better alternative than a second mortgage due to their flexibility in terms of taking out only what and when funds are needed. In addition, the repayment schedule is largely up to the borrower. And in many cases the interest portion is usually tax deductible under federal and several state income tax laws.
Home Equity Line of Credit in the Line of Fire
To learn more about HELOCs please research our extensive repository for more free articles on Home Equity Loans.
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