Home equity lines of credit (HELOCs) are actually
revolving credit arrangements, which you can use in much the same
way you would use a credit card. Your credit line, or limit, is fixed, and you can write a check for
any amount up to that limit. Whatever you borrow reduces what’s
available until you repay. Then you can use it again.
How you repay
The
terms
of repayment vary, and are spelled
out in your agreement. In some cases you begin to repay
principal
and
interest
as soon as you borrow, or activate the line. In others, you pay
interest only, with a balloon, or one-time full payment of principal due at some set date. Or, you may make interest-only payments
for a specific period, and then begin to repay principal as well.
Most credit lines have an access period,
often five to ten years, during which you can borrow, and a longer
payback period. The longer you take to repay, the more expensive
it is to borrow.
