A home equity line of credit (HELOC) can be useful when you are needing a lump sum to renovate your home, make a major purchase, or consolidate debt. A form of revolving credit, a HELOC is secured by your home equity. This is an open-ended loan that may be paid down or charged up for the a set length of time, similar to a credit card. The loan interest usually changes monthly
With a HELOC, the lending institution will approve you for a predetermined amount of credit - the largest sum you may borrow at any one time under the plan. In determining your credit limit, your income, outstanding debt, credit status and other monetary obligations will be considered. You will be required to schedule an appraisal of your home to assess your home's up-to-date market value. Your credit limit will be determined on all of your financial information, in addition to a fraction of your home's appraised value, which is subtracted from the balance owed on your present mortgage.
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