Decoding a Home Equity Line of Credit (HELOC)


A home is the most valuable asset you own. However, sometimes you may find yourself in need of funds to use in other areas of your life. Your home provides you with a way to obtain additional funds through a home equity line of credit (HELOC) from a lender. If you’ve never heard the term before or are unclear on how a HELOC works, keep reading to gain clarity on how it can work for you.

What is a HELOC?

A home equity line of credit (HELOC) is not the same as a home equity loan, usually referred to as a second mortgage. You typically must pay several types of up-front fees for a HELOC, as outlined below.

Common HELOC Fees

  • Loan origination fee
  • Annual fees
  • Appraisal fees

You don’t receive the money in one lump sum payment. Being approved for a HELOC gives you access to an agreed-upon amount of equity in your home using checks or a credit card given to you by the lender.

How Long Can You Access the Funds?

Most HELOCs last for ten years. During that time, you’re able to obtain funds as needed. You must begin repaying the HELOC once the draw period ends. The repayment term can last anywhere from five to 20 years, depending on the terms of the agreement you signed.

Can I Lose My Home if I Don’t Repay in Time?

Yes. Your lender can seize your home for foreclosure if you don’t meet the repayment terms of your agreement. It’s best to think about the amount you owe and whether you’ll have the resources to make timely payments before signing any contracts.

Have more questions on the best way of gaining access to the equity in your home? Contact Midland Mortgage today for a free consultation.

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