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A Home Equity Line of Credit (HELOC) is a revolving credit line that allows homeowners to borrow against the equity in their home. HELOCs typically have a lower interest rate than many other loan types with interest that may be tax deductable*. HELOCs are often used by homeowners seeking to fund large expenses or to consolidate other debt.

How HELOCs work

With HELOCs homeowners obtain a line of credit using their home as collateral borrow against its available equity. As the outstanding balance is repaid, the available credit is replenished – allowing the homeowner to borrow as little or as much against the draw amount again up to the defined loan limit if the need arises.

HELOC Requirements

Homeowners seeking a Home Equity Line of Credit will need sufficient equity in their home – of which, the HELOC loan size is determined (typically 85% of the available equity). Other factors include standard lending criteria such as credit scores, employment history, income and debt.

Repaying a HELOC

As the homeowner accesses the funds from their Home Equity Line of Credit, they receive a bill with minimum payment every month which include principal and interest. Additional payments made toward the principal allow the borrower to save on interest and reduce their overall debt more quickly.

• consult your tax advisor