JMC Real Estate Miami | 305.425.9500

Home Equity Line of Credit (HELOC)

Definition
A Home Equity Line of Credit (HELOC) is a revolving line of credit secured by the equity in your home. It allows homeowners to borrow money as needed, up to a pre-approved limit, and repay it over time. HELOCs typically have variable interest rates and work similarly to credit cards, where you can borrow, repay, and borrow again during the draw period.

Explanation
HELOCs provide flexibility for funding home improvements, debt consolidation, education, or emergency expenses. The credit limit is determined by the amount of equity available, usually up to 85% of the home’s appraised value minus the remaining mortgage balance.

Key Features of HELOCs:

Pros and Cons of HELOCs
Advantages:

Disadvantages:

Example
A homeowner with a property worth $400,000 and a remaining mortgage of $200,000 has $200,000 in equity. They obtain a HELOC with an 80% loan-to-value ratio, providing access to $120,000 in credit. They use $30,000 for home renovations, paying interest only on the amount used during the draw period.

Exit mobile version