What is a Home Equity Line of Credit?

Basic HELOC information at a glance

  • A home equity line of credit is a revolving form of credit that uses your home as collateral. With a HELOC, you can borrow up to the amount for which you are approved. You can access any fraction of the funds during the loan term.
  • HELOCs are referred to as revolving because they work like a credit card: As you use the funds available to you, you can repay them and access them again.
  • Home equity lines of credit have a variable interest rate that is based on the current Prime rate. It is traditionally lower than other types of personal or unsecured loans.

What is home equity?

Equity is the difference between your home’s value and the amount you still owe on your mortgage.

  • You build equity in your home as you make mortgage payments and your home increases in value.
  • To determine how much equity you have and, therefore, how much you may be able to borrow, have your home appraised and then subtract your total loans outstanding on your home from that value. Then, use this home equity calculator to see your Loan-to-Value ratio. This ratio lets you know how much the bank is willing to lend. If you have enough equity and good credit, you may be able to access up to 80% of your home’s value.

Why get a home equity line of credit?

HELOCs are an attractive option for homeowners who face large, ongoing expenses whose ultimate totals can be hard to predict. You may opt for a home equity line of credit for any major expense such as:

  • Education costs like tuition, textbooks or room and board
  • Home improvements and renovations
  • Medical bills
  • Paying off other big purchases like cars or boats
  • Debt consolidation

How does the HELOC process work?

After you've completed your home equity line of credit application and have been approved, you’ll receive checks connected to this line of credit. You can write a check at any time during the term of the loan to access your funds.

When it comes to repayment, home equity lines work a little differently from other types of loans. First of all, you only repay the amount you use. So, if you are approved for $30,000 but only spend $17,000, you only have to repay the $17,000 with interest.

Also, you can choose from flexible payment options. You can go with Interest-Only payments to keep your monthly payment lower or you can pay a steady monthly payment.

If you’re looking for fixed-rate home equity credit options, consider home equity loan information.

If a line of credit sounds like the financial solution for you, you can begin the home equity line of credit application process by answering a few questions online, or speak to a Citizens Bank Home Loan Advisor today.


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