Are you wondering How does a Home Equity Line of Credit works? Are you in need of a large sum of money for a very important reason like getting a car, financing large expenses, or consolidating debt on other loans, then a home equity line of credit is most probably what you need? If the question on your lips is ‘how does a home equity line of credit work?’ then, this is the best article for you to read.
How does a Home Equity Line of Credit Works
It will be very unfair to talk about how a home equity line of credit works without giving you a proper explanation of the meaning of a home equity line of credit. I am doing that for you below, so keep reading.
Home Equity Line of Credit
Now I am going to answer the question ‘What is Home Equity Line of Credit?’. Home Equity line of credit popularly called a HELOC is more like a loan talked to fund large expenses or to consolidate high-interest rate debts on other loans like credit cards, only that it is secured by your home i.e your home is used as collateral for the loan.
The interest rate for a HELOC is always low as compared to some other loans and the interest may be tax-deductible.
How a HELOC works
Now that we already know what a HELOC is, we can now get into how it works. Like I have said before, a home equity line of credit is a revolving form of credit that is secured by your house or property.
Here, you can borrow as little or as much as you need, up to your approved credit limit. With the Home equity line of credit, you can pay interest only on the amount that you borrow, take advantage of flexible repayment terms and you can then use the credit again as you pay down the balance.
What can a Home Equity Line of Credit be used for?
A HELOC can be used for a wide range of uses including large recurring expenses like your child’s tuition fees, a remodeling project that may last several years, medical expenses, and unexpected home emergencies.
How to Find Out how much Equity you have on your Home
Having a proper understanding of what your home equity is will help you know how much equity you have on your home. Your equity is the share of your home that you own versus what you owe the lender on your mortgage, for instance, if your home is worth $400,000, and you have a mortgage balance of $150,000, your home equity is $250,000.
Best Home Equity Line of Credit
Below are the best HELOC lenders you can get in the year 2022
- Rocket Mortgage
- Guaranteed rate
- Bank of America
- US Bank
- PenFed
- PNCBank
- Connexus
- Flagstar
- Suntrust
To get the best Home equity line of credit, make sure you compare all the platforms to see which one gives the combinations of the best features and interest rates for you. Further research can be done on Google.
