Home Equity Line of Credit (HELOC) is a home mortgage loan that works much like credit cards. It allows you to borrow funds up to a certain established credit limit, usually on as needed basis. However unlike credit cards which are unsecured debts, HELOCs are collateralized against your home.
There are several benefits of a HELOC:
- You pay interest only on drawn amount and not the credit limit.
- Low annual fees – usually less than $100.
- Can help you avoid paying private mortgage insurance (PMI).
- Can help you keep the 1st mortgage under the conforming or conforming high balance limit.
- Can increase your borrowing power.
- Purchase price – $450,000
- Down Payment – $50,000
- Purchase Price- $900,000
- Downpayment – 20% or $180,000
- Loan Amount – $720,000