Repaying a HELOC
As a general rule, you can borrow up to
80% of your
equity
in your home — the appraised value of your home minus the
amount you still owe on your
mortgage
— with a line of credit.
For example, if you owed $75,000 on a home
appraised at $250,000, your equity would be $175,000. So in most
cases, you’d be able to borrow up to $140,000, or 80% of
$175,000. However, some home equity lines of credit, especially
those offered without closing costs or other up-front expenses
are capped at a fixed amount, often $50,000.
Where credit is due
While you have a line of credit, your equity
is reduced by the amount you owe. When it’s paid off, your
equity is restored. But, if your home loses some of its value
during the loan period, you still owe the full amount you borrowed.
Remember, like home equity loans, home equity
lines of credit also put your home at risk. The property serves
as
collateral,
and if you
default,
or fall behind on repayment,
the lender can foreclose.
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