Home equity line of credit
A home equity line of credit (HELOC) is similar to a home equity loan, except that the funding can happen over a period of time. An appraisal will be required to determine the amount of the equity-based line of credit. This credit line is an approved sum against which the borrower may draw (or pay down and even draw back up) as desired, up to that pre-determined amount, for a specific duration of time (5, 10, even 20 years). Most often the interest rate will fluctuate month by month during the funding period. Generally you will make monthly interest-only payments until the loan is completely funded. Once that pre-set funding period is over, the credit line will convert to a second mortgage loan, and payments for both the principle and interest will begin. Many of the loan costs and fees applicable to the first mortgage are required for the HELOC as well.
