A HELOC loan, or a Home Equity Line of Credit loan, is a type of revolving credit that allows homeowners to borrow against the equity in their home. It is a form of a second mortgage, with the borrower’s home serving as collateral for the loan.

Unlike a traditional mortgage or personal loan, this loan allows borrowers to access funds as needed, up to the approved credit limit, during a specified draw period, typically 5 to 10 years.

The maximum amount that can be borrowed through a HELOC loan is determined by the loan-to-value ratio, which is the percentage of the home’s appraised value that the lender allows the borrower to borrow against. This loan-to-value is calculated by what is owed currently on the home’s first mortgage, and by how much is being requested for the HELOC loan.

HELOC loans offer flexibility and can be a useful financial tool for homeowners who have built up significant equity in their homes. However, it’s crucial to consider the risks associated with using your home as collateral and the potential for variable interest rates, which can lead to higher payments in the future.

Should you feel a HELOC loan will fit your needs, please reach out to us at Sterling Financial Services to understand the terms and conditions and assess your ability to repay the loan.