A home equity line of credit (HELOC) can be useful when you are looking a lump sum to remodel your home, make a major purchase, or consolidate debt. A HELOC is a kind of revolving credit 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, similar to a credit card. The interest rate can fluctuate (usually monthly).
Your lender will determine your credit limit (the maximum amount you can borrow) in the HELOC. In determining your credit limit, your income, debts, credit status and other monetary circumstances will be taken into account. You are required to do an appraisal to determine your home's current market value. Your credit limit will be based considering all of your financial information, in addition to a percentage of your home's appraised value, which is subtracted from the balance owed on your existing mortgage loan.
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