3 Things to Know about a Home Equity Line of Credit
A home equity line of credit allows a homeowner to borrow against home equity as needed. Because money can be borrowed over an extended period of time, a home equity line of credit limits interest costs and prevents excess borrowing. If you are interested in this form of financing, this article offers three things to know about a home equity line of credit.
A Home Equity Line of Credit is a Revolving Account
Like a credit card, a home equity line of credit is a revolving account. This means that you are approved for a certain amount and can borrow money as needed up to that amount. You only make payments on the amount that is actually borrowed.
A Home Equity Line of Credit is Flexible
A home equity line of credit usually comes with a variable interest rate. However, some lines of credit have fixed interest rates. You will also find that a home equity line of credit may have large upfront fees or closing costs, annual fee, or balloon payments at the end of the loan. No one loan is right for everyone. Take time to compare lenders and options. This will help you choose the home equity line of credit best suited to your individual needs.
A Home Equity Line of Credit Puts Your Home at Risk
To get a home equity line of credit, you will need to put your home up as collateral. If you default on your payments, your home could be at risk. Before borrowing money from a home equity line of credit, make sure that you understand the payments terms and are confident in your ability to repay what you have borrowed.