What is a home equity line of credit (HELOC)?

A home equity line of credit (HELOC) is correctly described as a revolving line of credit secured by home equity. This financial product allows homeowners to borrow against the equity they have built up in their property. Since the credit line is based on the appraised value of the home less any existing mortgage balance, it provides homeowners with flexibility in accessing funds when needed.

One of the key features of a HELOC is that it operates similarly to a credit card, where borrowers can withdraw money as needed up to a specified credit limit and are only required to pay interest on the amount they draw. This makes it a convenient option for home improvements, debt consolidation, or emergencies, as it allows for ongoing access to funds over time.

In contrast to other options, a fixed loan for buying a new house would not provide the flexibility and structure of a revolving credit line. A personal loan typically does not have the advantage of being secured by property and is generally offered for a fixed amount with fixed payments. A grant for home renovations includes funds that do not require repayment and is not a type of credit or loan product at all.