Question:

What is a HELOC loan?

Answer:

You are hardly unaware what a HELOC loan is. It is a loan that is widely used as a way to tap equity in your house, much as with a second mortgage.

HELOC stands for a home equity line of credit and differs from the HELs - simply, home equity lines. A HELOC is used as a credit card. At closing the HELOC, you are assigned a credit limit and you could use it up at once, or whenever you may need it.

The HELOCs rate is based on the prime rate plus the margin determined by the lender. No lender is demanded to disclose their margin at closing. It is the responsibility of the borrower to inquire about the HELOC margin. Usually, a HELOC quote will show how long the introductory period and what the starting rates are, but the margin may not be disclosed.

On the whole, HELOCs are a very flexible type of home loan and as interest on a HELOC is usually tax-deductible in most states, this makes them a very attractive loan option.

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