A HELOC, or Home Equity Line of Credit, is a revolving line of credit secured by the equity in your home, allowing you to borrow money as needed up to a set credit limit

. Your home's equity is the difference between its current market value and the amount you owe on your mortgage

. How a HELOC works:

• You can borrow funds during a "draw period," typically around 10 years, using checks, a card, or online transfers

• As you repay the borrowed amount, your available credit replenishes, similar to a credit card

• After the draw period ends, a repayment period begins (usually 10 to 20 years), during which you repay the principal and interest and cannot borrow more

• Interest rates are usually variable, tied to an index like the U.S. Prime Rate plus a margin, but some lenders offer options to convert part of the balance to a fixed rate

Key features:

• The loan is secured by your home, so failure to repay can lead to foreclosure

• You typically can borrow up to about 80-85% of your home's value minus what you owe on your mortgage

• Monthly payments during the draw period may be interest-only, but principal payments can be made to reduce debt faster

• HELOCs often have lower interest rates than credit cards or personal loans because they are secured by your home

• There may be fees such as application, annual, or early closure fees, depending on the lender

Uses and benefits:

• HELOCs are commonly used for large expenses like home improvements, education, or debt consolidation

• They offer flexibility since you borrow and repay as needed within the credit limit during the draw period

• Interest paid may be tax-deductible if used for home improvements, but consult a tax advisor

In summary, a HELOC is a flexible, secured borrowing option that lets homeowners tap into their home equity through a revolving credit line, with the home as collateral and variable interest rates