10th Nov 2009 by Michael Haltman
Simply put, a HELOC or home equity line of credit is a way to tap into the equity that you may have in your house. Different from a mortgage in that you don't get a lump sum of money, but rather the ability to write checks up to a certain amount.
If your house is worth $1,000,000, and you currently have a $300,000 mortgage on it, a bank may give you a HELOC, or home equity line of say $500,000. This would mean that the $300,000 first mortgage and $500,000 credit line brings the lien against the house to $800,000, or 80% of the homes value.
This is generally the maximum that a lender would feel comfortable lending. You can then write checks and pay only for the money that you have borrowed.
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This answer is the subjective opinion of the writer and not of FinancialAdvisory.com