A Home Equity Line of Credit (HELOC) Loan can be used to purchase properties with a first loan or with a second loan, behind another first loan. These are mainly used for primary home loans. The ARM HELOC is an “open ended” loan, meaning that your loan payment can go down or up during the life of the loan based on your loan balance. This means that an ARM HELOC is reusable, similar to the way a credit card works. When they are a Fixed HELOC, you can only pay your loan balance down.
Typical Loan Features – HELOC
- Loan secured against real estate
- Great for borrowers wanting to pay down their borrowed funds quickly
- Loan terms are typically 30 years, but other terms are available.
- Interest accrues much like the interest on credit cards and payments are based on loan balance.
- Typically, HELOC’s have an adjustable rate, with a possible option to convert to a fixed rate.
- HELOC loan balances can go up or down during the loan period.
Typical Loan Requirements – HELOC
- Credit line amount must reflect the amount of equity and lender’s guidelines
- Monthly repayments of principal and interest during the draw period
- Remaining balance must be repaid during repayment period