Discover how a HELOC works and how you can leverage your home’s equity for financial flexibility and funding major expenses.
A Home Equity Line of Credit (HELOC) is a flexible financial tool that allows homeowners to borrow against the equity of their home. Essentially, it functions like a credit card, with your home serving as collateral. You can borrow up to a certain limit, repay it, and borrow again within the draw period.
With a HELOC, you only pay interest on the amount you borrow. During the draw period, typically 10 years, you may have the option to make interest-only payments. After this period, the repayment phase begins, and you must pay back the principal plus interest. This flexibility makes HELOCs ideal for projects with varying costs, such as home renovations, or as a financial cushion.
Before opting for a HELOC, consider the potential risk of borrowing against your home. If the housing market declines or if you're unable to make payments, you risk foreclosure. Ensure you have a repayment plan and use this financial tool wisely.
