How Does a HELOC Work?

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A home equity line of credit (HELOC) can be useful when you are needing a lump sum to renovate your home, make a major purchase, or consolidate debt. Using your home equity as collateral, a HELOC is revolving credit. This open-ended loan can be charged up or paid down during the set term of the loan. The loan interest rate generally changes every month

The lender will determine your credit limit (the maximum you can borrow) with the HELOC. In deciding your credit limit, your pay-rate, outstanding debt, credit history and any other monetary obligations will be reviewed. An appraisal will be required on your home to determine the property's present market value. Your home's current value, subtracted from your remaining mortgage loan balance helps to determine your particular credit limit.