How Does a HELOC Work?
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If you need some extra money to make a big purchase, renovate your house, or pay the balance on a high-interest credit card, a HELOC (home equity line of credit) might be just what you're looking for. Using the equity in your home as collateral, a HELOC is revolving credit. This open-ended loan may be be charged up or paid down over the set term of the loan. The loan interest rate usually fluctuates every month
In a HELOC, the lending institution approves you for a particular credit amount - the maximum sum you are able to borrow at any one time with the agreement. Your credit status, salary, debts and various other financial circumstances will determine your credit limit. You are required to have an appraisal to assess your home's current value. Your credit limit will be based on all of your financial information, as well as a percentage of your home's appraised market value, which is subtracted from the balance owed on your existing mortgage.
At Real Property Finance, we answer questions about Home Equity Lines of Credit every day. Call us at 310-379-5997.