A home equity line of credit (HELOC) is a line of credit that allows you to tap into your home’s equity or the difference between what your home is valued at and how much you owe on it.
How it Works
Like a credit card, a HELOC is a revolving line of credit that allows you to borrow up to a certain limit, pay it off, and then borrow it again. That limit is determined by a percentage that the lender sets for you called the LTV (loan-to-value). The LTV is the ratio of how much you owe on your home versus how much it’s actually worth.
The amount of money that a bank or credit union will allow you to borrow for your HELOC will depend on what they set as their max acceptable LTV.
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