A Home Equity Line of Credit (or HELOC, for short) is a line of credit which is secured against the equity in your house. Different banking institutions offer different rates and terms based upon the percentage of equity you have available in your home. These lines of credit sit behind your mortgage, allowing you to capitalize on the equity in your home for things like home repairs, weddings, purchasing a car or investment property, or to consolidate debt.

HELOCs offer a variable rate, meaning the rate can, and will, change with a given index (usually prime or LIBOR).  They have multiple payment options, but generally you are only required to make minimum interest payments every month; it is your responsibility to pay more to cover the principle. Different institutions will give you anywhere from 10 to 30 years to draw against the line of credit, then will give you a period of time to repay any accrued debt after the draw period.

These lines of credit are an extremely effective way to capitalize upon the equity you have built in your house. For most people, a house is the largest investment they own, and it can become necessary to tap into the money vested within it. If you are considering a HELOC, the best place to start is a local credit union. You will usually get the best rates and terms there, with the easiest underwriting. Should you not have a local credit union you can join, local community banks are usually the next best choice. Only after you have exhausted both of these options would I normally recommend looking into larger commercial bank options.

If you are thinking about using a HELOC to tap into your equity, feel free to contact me and I will help you understand how a HELOC might benefit you. If you have anything to add about HELOCs, leave a comment.