Home Equity Line Of Credit

The single largest investment the majority of individuals will ever make is their home. It usually takes decades to pay off, but once it is, homeowners have a great deal of equity in the house, which can make up a large portion of their net worth. At times, such as when they want to make improvements or additions to the home, some homeowners choose to borrow against the equity in a home. But what exactly does it take to do this and is it a good idea for your situation? Continue reading to learn some of the basics about what it means to take a line of credit against the equity in your home.

What Is A HELOC?

A home equity line of credit (HELOC) is a tool used by lending institutions to lend money for a variety of needs. It can be used in a variety of scenarios in which someone owns a portion of or their entire home. The equity value of the home can be viewed as collateral against the money you are borrowing from a lending institution. A HELOC is different from a traditional mortgage, which is extremely attractive to those who don’t want to lock into such a long-term commitment. Money can even be borrowed against the value of the home to make improvements to increase the home's value in the long run. Before jumping into any major financial decision, it is imperative to research the process thoroughly so you know exactly what you’re getting into.

Continue reading to find out how a HELOC works.