What is a HELOC?
HELOC is the acronym for Home Equity Line Of Credit.
A HELOC is a Secured Line of Credit which means that it is backed (secured) by the value of the property it is attached to.
The HELOC is registered on the title of the property and therefore when the property is sold, the balance owing on the HELOC must be paid out just the same as any remaining mortgage balance.
Because a Home Equity Line of Credit is secured by the property, interest rates are generally much lower than the interest rate on a line of credit that is unsecured.
A HELOC is a form of revolving credit which means that you can withdraw funds from it at any time as long as you don't exceed the limit, of course, just like a typical credit card.
When it comes to repayment, if you have a balance owing on the HELOC, you must make at least a minimum payment each month. For most HELOC's, the minimum payment is equal to the interest accrued during the previous month. However, some will have a different repayment structure.
The interest rates on HELOC's are based on the Prime Lending Rate and therefore are subject to change..similar to variable or adjustable rate mortgages.
If the Prime Lending rate changes, so will the interest rate on your Home Equity Line of Credit.