What exactly is a Home Equity Line of Credit (HELOC)? It’s essentially a mortgage taken out in the 2nd lien position, enabling homeowners to extract equity from their property in the form of cash for various purposes.

HELOC stands for Home Equity Line of Credit.

Is a HELOC considered a 2nd mortgage? While a HELOC would occupy the 2nd lien position if you have only one mortgage on your home, it differs from a traditional 2nd Mortgage. Unlike a 2nd mortgage, a HELOC operates as a line of credit, offering you a maximum credit line that you can draw from multiple times. In contrast, with a 2nd mortgage, you can only access the funds once.

To illustrate, let’s say you have a $25,000 HELOC. You might use it initially for home repairs, pay off that amount, and then tap into the $25,000 line of credit again for debt consolidation or a purchase. The duration for which this line of credit remains open depends on the terms of your HELOC, ranging from 1 year to 10 years or more. Think of a HELOC as akin to a credit card, where you can utilize the funds, repay them, and then reuse them as needed.

What are the benefits of a HELOC?

• Accessing your home’s equity without impacting your low-interest rate or the principal amount
• Expedited application and approval process
• No hard credit inquiry required
• Potentially, no in-person appraisal or inspection necessary