Question:

What is a home equity line of credit?

Answer:

The HELOC, or the so called home equity line of credit is what an open-end line of credit is. It is a loan using your home as collateral and you are allowed to draw on it until the credit limit is exhausted. The simple interest calculated on a HELOC is usually completely tax-deductible. If you partially repay a HELOC, or a home equity line of credit, you will be allowed to use it again.

Many people will use a home equity line of credit as a resource to cover expenses for different items - could be tuition fees, medical bills, or even a luxurious vacation.

HELOCs' rate is tied to a prime rate plus some margin. They are usually adjusting the first day of every month, going after the prime rate. A home equity line of credit is in essence an ARM adjusting monthly. If you are shopping for a home equity line of credit, you are not interested in the APR. Rather, you have to ask about the margin to calculate if you should take it. Usually, a HELOC will be advertised with a starting teaser rate which will not adjust for several months.

Mortgage rates hit their lowest since 1955. Ask the home loan experts we recommend Quicken Loans how to take advantage of them.
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