What is a home equity line of credit or HELOC?
A HELOC is simply an open-end loan set up as a line of revolving credit for some maximum draw, instead of a fixed loan amount in which your home is collateral. This is an open-end loan that permits the borrower to repay and re-borrow the funds available. HELOCs can be used to pay for several important items such as college education tuition, private school education, high interest debt, home improvements, home renovation, and major medical bills.
A home equity line of credit, which lenders and mortgage brokers refer to as a HELOC, is a different kind of home loan. An equity line has different rates and terms from a conventional first mortgage. In a standard home loan, or mortgage, your monthly payments cover both the principal loan and the interest you are charged. Most mortgage payments include escrow, or taxes and insurance. An equity line of credit payment does not reduce your principal loan amount and does not include escrow. You are borrowing the equity in your house and paying the bank an interest premium on that loan. With a HELOC, you pay only the interest on the loan and, generally, you get the money for less time than you do a standard first mortgage. The underwriting on these loans is very simple, and in most cases, the loans are very easy to get. At close, you either get one big check, which you can deposit into your savings or checking account or you can get a check book and treat your equity line of credit as anot
