Home Equity Line Of Credit - HELOC
WHAT IS A 'HOME EQUITY LINE OF CREDIT - HELOC'
A home equity line of credit (HELOC) is a line of credit extended to a homeowner that uses the borrower's home as collateral. Borrowers are pre-approved for a certain spending limit, based on household income and credit score, and may draw on this limit at their discretion. Interest is charged at a predetermined variable rate, which is usually based on prevailing prime rates.
Once there is a balance owing on the loan, the homeowner can choose the repayment schedule, as long as minimum interest payments are made monthly. The term of a HELOC can last anywhere from less than five to more than 20 years, at the end of which the entire remaining balance must be paid in full.
You only pay interest on what you actually borrow and there are no closing costs. You may borrow up to $100,000 (($50,000 if you are married filing separately) and deduct the interest from your income taxes.
BREAKING DOWN 'Home Equity Line Of Credit - HELOC'
HELOCs Are Hot Again
When real estate values were surging in the 2000s, it was common for people to borrow against the equity in their residences. That slackened with the bursting of the housing bubble in 2007. But now, many regions of the United States, home values are continuing to rebound, swelling the home equityavailable to