HELOC
By Jude Wallis
A HELOC is a revolving line of credit secured by home equity. The borrower draws only what is needed, and interest is charged on the drawn balance rather than on the unused line.
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HELOC is short for home equity line of credit. During the draw period the balance can rise and fall. Many agreements require only accrued interest in that phase. When repayment begins, new draws stop and principal joins the payment.
Most HELOC rates are variable, so the charge can move even when the balance does not. The home is collateral. Principal is the amount still owed before the next interest charge.
How a HELOC works is the explainer. The HELOC calculator prices the interest-only month. A lump-sum home equity loan is the neighbour in HELOC against a home equity loan.