Clear Talk About Mortgages

How Does a Home Equity Line of Credit (HELOC) Work?

In recent years, more and more mortgage companies and financial institutions advertise home equity lines of credit or HELOC. Many markets across the nation have experienced a sudden increase in home appreciation, which means homeowners can tap into their equity and access cash for a variety of purposes. A HELOC is a second mortgage, wherein there is a second lien on the property.

HELOC Rewards
With a home equity line of credit, borrowers are only required to pay the interest throughout the initial years of the loan. Although these types of loans may seem like a credit card, a HELOC is very different. Unlike a credit card, the line of credit is secured by your home. In other words, defaulting on a HELOC allows the mortgage lender to foreclose or reclaim your residence.

Risks Involved with HELOC's
In rare instances, a home equity line of credit borrower can lose their home. For this reason, it is important to fully understand HELOC's, and choose a good mortgage lender. There are many different home equity line of credit products. Approach this lending process with caution, and use the line of credit responsibly.