How Does a Home Equity Line of Credit Work?
How Does a Home Equity Line of Credit Work? If you want to make an important purchase but do not currently have the money, you don’t necessarily have to put things on hold. If you own a house and have been paying your mortgage for several years, you may have enough equity to qualify for a home equity line of credit, or HELOC. Before you take that step, you need to understand how a HELOC works and ask yourself whether the purchase you want to make is worthwhile and whether you can handle the responsibility that comes with accessing your home’s equity. How it Works A HELOC is a line of credit that draws on the equity in your home, which is the current value of your home minus the amount you still owe on the mortgage. You may be able to receive as much as 80 or 90 percent of your home’s equity as a line of credit. You can use that credit all at once or a little at a time to lower your interest rates on credit card balances, make home improvements , buy a car or cover college costs. ...