This is for informative and educational purpose only; the information provided does not include additional fees/charges that might be pertinent to your loan.
Home Equity Line of Credit (HELOC) is a line of credit you can have using your home equity. It is just like a credit card. You can borrow money up to a certain limit. The credit limit on a HELOC depends on the market value of your house and how much you owe on your mortgage. For example, if your home’s market value is $300,000 and you are owing $250,000 on your mortgage, then $50,000 is your home equity. The bank typically allows you to borrow 85 percent of your home’s market value minus the amount you owe on your mortgage. In this scenario, the amount you can borrow is $42,500.
Home’s value: $300,000
85% of home’s value: $255,000
Mortgage owed: $250,000
Line of credit amount= $255,000 - $250,000 = $5,000
For you to qualify for a HELOC, you are required to have a home equity. What this means is that the amount of mortgage owed on your home must not be greater than your home’s value, it has to be lower than your home’s value.