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what is the definition of home equity line of credit?

Posted on: 20th Nov, 2006 03:10 pm
what is home equity line of credit?
It is a type of loan in which the lender agrees to lend a maximum amount within an agreed period based on the available equity in your property as collateral.

In this type of loan the borrower is not advanced a single entire sum but uses the line of credit to borrow sums that total the agreed maximum amount.

For example, using a normal mortgage you might borrow $200,000, which would be paid out in its entirety at closing.

In a HELOC instead, you receive the lender’s promise to advance you up to $200,000, in an amount and at a time of your choosing.

You can draw on the line by writing a check, using a special credit card, or in other ways.
Posted on: 20th Nov, 2006 03:47 pm
Hi Satish,

Home Equity Line of Credits also has a draw period during which you can use the line and a repayment period during which it must be repaid.

The draw period is normally 5-10 years, in this time period you will be required to only pay the interest and the repayment period is usually 10-20 years.

In this repayment period you will have to make payments to the principal equal to the balance at the end of the draw period divided by the number of months in the repayment period.

However, some HELOCs require that the complete balance be repaid at the end of the draw period.

Thanks
Blue
Posted on: 20th Nov, 2006 04:08 pm
Hi Satish,

Please go through this page on HELOC for more information on this type on loan.

Thanks
Colin
Posted on: 20th Nov, 2006 04:15 pm
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