Home Equity Line of Credit (HELOC)
A Home Equity Line of Credit (HELOC), also known as a "Secured Line of Credit", is a first or second mortgage that allows you to access the equity in your home. It does not pay out in a lump sum but functions as a revolving line of credit with an adjustable interest rate, which is usually based on the prime rate*.
This means that a HELOC can help you solve many financial issues:
- Fund investments
- Consolidate your debt into lower monthly payments
- Repair your credit by paying off collections or judgements
- Fund home renovations
- Purchase a vacation or investment property
- Pay off personal taxes, property taxes or mortgage arrears
- Short term or bridge financing
- Pay for your children’s education
- Extra “cash reserves” for when you need them most
- Use your home equity for cash for any purpose
Benefits:
- You can use the funds, repay them and use them again
- You do not have to reapply every time you need more money from the credit line
- You only pay interest on the money that you use
- Interest rate is usually lower than most personal loans and credit cards, saving you money on interest, especially if you consolidate higher interest loans or credit card debt.
* It is important to note that with an adjustable rate, there is a possibility of rising rates, this means that your payments due will also rise.