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Home Equity Line of Credit (HELOC)

A home equity line of credit (HELOC) is an adjustable-rate second mortgage set up as a line of credit. A HELOC is secured by your home, and has a specified credit limit, similar to a credit card, allowing you to borrow against it at your convenience. A borrower can access any portion of the credit line at any time, and pay it back at any time (monthly minimums must be paid) in the loan period. In contrast to a lump-sum home-equity loan, home equity lines have revolving balances - borrowers may continue to borrow against and repay the line repeatedly, as long as they do not exceed their credit limit.

Borrowers often use home equity lines of credit to pay for expenses that may not have fixed costs, such as a renovation. Home equity lines of credit are an alternative to home equity loans and cash-out refinancing for borrowers who need cash over a period of time.