A home equity line of credit essentially gives you access to the equity that you have in your house. Lenders will have various terms, but one example is being able to borrow through this line of credit up to 85% of the total equity in the real estate that you own.
For example, perhaps you bought a house for $300,000 ten years ago. The value of that house has now tripled and it’s worth $900,000. A home equity line of credit would give you the ability to borrow against this equity. Your real estate essentially becomes a way for you to get access to cash since you have so much more value in the property than you’re actually paying on the loan that you took.
You can also do this if you own the home outright, using the house as collateral so that you can get access to the cash without actually selling your home to a third party.
This can be a useful financial tool
As far as whether or not this is a good idea, it depends on your specific needs. If your home has gone up significantly in value, or if you have your house paid off, you may feel that the value of that property is largely theoretical. You’re not planning to sell your home, so does it really matter that the value went up with the rest of the real estate market?
With a home equity line of credit, the answer is yes. You can use that to your benefit, and people will sometimes use a home equity line of credit simply to make repairs or updates. Maybe you want to renovate your property or put on an addition. You can leverage the equity that you already have to accomplish these goals without having to take out another type of loan.
It can be a complex process to determine how to use a HELOC and when you should do so, so it can help to work with an experienced law firm at this time.