Home Equity Line of Credit: Understanding Home Equity

When you purchase a home, you may wonder how home equity line of credit works if you plan on doing major repairs or remodeling.

What Is Home Equity?

Home equity is a credit line you can use as part of your mortgage. Home equity credit is based on your home’s value, the percentage your lender determines and how much you owe on the home. As you pay on your home, your equity increases. To calculate your home equity line of credit, use a home equity line of credit calculator.

Other factors that determine how much your lender will offer you for a home equity line of credit are:

• Debt
• Income
• Credit history
• Ability to repay

When to Use Home Equity Line of Credit

Some lenders will give you a limit of time you can use your home equity credit. This limit for many lenders is 10 years. If you don’t use it by this time, you can apply for a renewal through your lender.

When to Repay Used Home Equity Credit

Many lenders give you up to the time you have to use the home equity credit to repay it. Therefore, if you have 15 years to use your home equity, you have to pay it back by the 15^th year.

How to Use Home Equity Line of Credit

Your lender will give you either checks or a home equity visa. You use these just as you would a regular check or credit card. Some lenders require that you use a minimum amount for each withdrawal, so check with them to find out.

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