What is a HELOC? How home equity lines of credit work

If it’s been a while since you bought your home, you’ve probably built up home equity. That’s the part of your home you own (its value minus whatever you still owe on the mortgage). A home equity line of credit (HELOC) is one of the most common ways to turn that equity into cash for short-term expenses.

A HELOC doesn’t work like a typical loan, though, and its structure affects how much you can borrow, how you pay it back and how much risk you’re taking on. Here’s what to know before you open one.

“A HELOC is a financing option that lets homeowners access equity they’ve accumulated in their home,” says Kyle Enright, the president of lending at Achieve, a digital personal finance company in San Mateo, California. That equity, he explains, is what’s left when you subtract your mortgage and any other debt on the home from its current market value.

Unlike a traditional loan, a HELOC gives you a revolving line of credit that you can borrow from as needed, up to a set limit. Your home secures the credit line, so you generally need enough equity to qualify — and falling behind on payments could ultimately…

Original source: https://www.usatoday.com/money/