The Basics of a Home Equity Credit Line

A home equity credit line is a revolving credit line account secured by the equity in your home. It has a variable interest rate, based on the prime rate as published in the Wall Street Journal. There is a draw period of usually 10 to 15 years. During the draw period, you have the option of making interest only payments, or fully amortized payments. At the end of the draw period, the credit line converts to a fully amortized loan for the remaining balance.

The difference between a home equity credit line and a home equity loan, is that a credit line can be withdrawn as you need it, where an equity loan is paid out in one lump sum. Also, a home equity credit line has a variable interest rate, while an equity loan has a fixed rate.

Based on your equity, you can get a credit line amount as high as $250,000. A credit line is available up to 100% of value, no equity is required.

A home equity credit line is available for owner-occupied single family homes, condominiums and townhouses. Ineligible property types include mobile homes, agricultural properties, co-ops, time-shares, and rentals.

Because an equity credit line is secured by a mortgage on your primary home, the interest can be tax deductible.