What is HELOC (Home Equity Line of Credit)?
HELOC (Home Equity Line of Credit) is a line of credit on the equity of your house. You can draw money from this account as many times as you need (up to your credit limit) and pay it back as many times as you wish. You pay interest only, and only on the balance you owe. The rate is adjustable and is the combination of an index (usually Prime) plus a fixed margin. Your monthly payment is dependent on your loan balance, the Index, and the fixed margin. You can draw money and pay it back only during the first 5 years (some lenders do it for 10 years). At the end of the 5th year, your loan balance will be amortized for 10 years with an adjusted monthly payment (some lenders amortize it for 15 years).
