A home equity line of credit (HELOC) can be helpful when you are looking to borrow a lump sum to renovate your home, make a large purchase, or consolidate debt. Using the equity in your home as collateral, a HELOC is revolving credit. This is an open-ended loan that may be paid down or charged up for the term of the loan, similar to a credit card. The loan interest rate usually fluctuates every month
Your lender will determine your credit limit (the maximum you may borrow) in the HELOC. Your credit history, income, debts and other financial circumstances can determine your credit limit. You are required to schedule an appraisal of your home to assess your home's up-to-date market value. Your credit limit will be set considering all of your financial information, in addition to a percentage of your home's appraised market value, which is subtracted from the balance owed on your existing mortgage.
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