A HELOC, or Home Equity Line of Credit, is a type of loan that allows homeowners to borrow against the equity they’ve built up in their property. Equity is the difference between the appraised value of the home and the balance owed on the mortgage. With a HELOC, homeowners can access funds as needed, similar to a credit card, up to a predetermined credit limit.
They can borrow and repay funds multiple times during what’s known as the draw period, typically ranging from 2 to 10 years. During this time, borrowers may only need to make interest payments on the amount borrowed. After the draw period ends, the loan typically enters a repayment period, during which both principal and interest payments are required. HELOCs typically have variable interest rates, which means that the rate can fluctuate over time based on market conditions.
