A home equity line of credit (HELOC) can be useful when you are looking a lump sum to renovate your home, make a large purchase, or consolidate debt. Using your home equity as collateral, a HELOC is revolving credit. This is an open ended loan that can be paid down or charged up for the term of the loan, similar to a credit card. The rate of interest changes (usually monthly).
In a HELOC, the lender approves you for a specific credit amount - the maximum sum you can borrow at any one time under the plan. Your credit score, salary, debt and various other financial information will affect your credit limit. In order to ascertain your house's present market value, you will need an appraisal on your home. Your home's market value, subtracted from your remaining mortgage balance will help to determine your particular credit limit.
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