What is a HELOC?

A Heloc is an open end loan set up as a line of credit based upon the value of the home for some maximum draw, rather than for a fixed dollar amount. Heloc stands for Home Equity Line of Credit.

Heloc’s are common place in Australia and the United Kingdom. Over 80% of home buyers use Heloc’s to finance their homes in those countries. Heloc’s work similar to credit cards in that every payment increases the equity of the credit line.

Money is borrowed by to a certain limit by the lender with the home buy paying back the amount along with interest. You can withdraw and make payments on daily or weekly basis.

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Pros of a HELOC

• Lower upfront cost than typical mortgage
• Lower interest rates than a credit card
• Interest charged only on what you draw out
• Low or no closing cost

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Cons of a HELOC

• Interest rates can be adjusted higher
• Late or missed payments will affect your credit
• There may be different types of fees
• There may be minimum drawdowns

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