When homeowners seek to leverage their home equity, they often come across two options: a Home Equity Line of Credit (HELOC) and a home equity loan. While both options allow access to home equity, they differ in terms of structure, repayment, and flexibility. Understanding the distinctions between these two can help you make an informed decision that aligns with your financial goals.

Understanding HELOC

A Home Equity Line of Credit (HELOC) is a revolving line of credit that allows homeowners to tap into the equity they've built up in their homes by using it as collateral. Understanding how a HELOC works, can help you leverage this resource to fund various expenses and achieve your financial goals.  To qualify, you typically need substantial home equity and a good credit score. Once approved, you are granted a credit limit based on a percentage of your home's appraised value, minus any outstanding mortgage balance. During the draw period you can access funds up to your credit limit as needed. The repayment period follows, during which you make regular payments towards the principal and interest.