If you want to borrow money to consolidate funds or buy a big-ticket item, a home equity line of credit (HELOC) might be useful. A form of revolving credit, a HELOC is secured by the equity in your home. This is an open ended loan that can be paid down or charged up for the a set length of time, much like a credit card. The loan interest rate usually changes monthly
The lender will set your credit limit (the maximum amount you can borrow) in the HELOC. In setting your credit limit, your salary, debts, credit status and additional financial obligations will be reviewed. You are required to do a home appraisal to assess your home's current market value. Your credit limit will be determined considering all of the above, as well as a percentage of your home's appraised market value, which is subtracted from the balance owed on your existing mortgage loan.
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