Home Equity Line Of Credit (HELOC)
Home Equity Line of Credit, or popularly known as HELOC, is the process of obtaining a loan by leveraging your home equity. The average equity that qualifies for HELOC is around 15% to 20%. This means that you need to have paid off at least 15% to 20% of your mortgage. Based on the equity and market value, the loan amount is approved by the lender.
Since HELOC is a revolving line of credit, you are free to withdraw as much as you wish of your approved amount in the “draw” period. This amount can be used in other home remodeling projects as well and can be a great resource for unforeseen expenses. While withdrawing, you must make sure that you can afford to pay it back with interest. Be mindful that since the collateral is your home, not paying back on time puts you at a great financial risk despite the flexibility.