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What is a Home Equity Line of Credit

Have you ever wondered what a “HELOC” is? HELOC stands for “Home Equity Line of Credit”- it’s a financial tool available to homeowners to fund home improvement projects, vacations, and more! We asked our Southside Branch Manager, Whitney, to help us explain it a little better. Keep reading or click on the video below to learn more!

In the spring and summer, you’ll probably see a lot of ads for HELOCs to help you upgrade your kitchen, transform your backyard, or any other home remodel job you can think of. Those ads usually focus on what you can do with a HELOC instead of explaining what a HELOC is in the first place.

What Does HELOC Stand For?

“HELOC” stands for “Home Equity Line of Credit”. That may seem complicated at first, but it’s pretty easy to understand once you break it down into two sections: “Home Equity” and “Line of Credit”.

A line of credit is a type of revolving credit, which means that you are allowed to borrow up to a set limit and pay it back over time. You have an available amount of credit that you can draw from. As you pay it back, you refill the amount of credit that is available to you. You pay interest on any remaining balance that has not been paid off at the end of the month.

Essentially, a Home Equity Line of Credit works very similarly to a credit card, which is another type of revolving credit. The biggest difference between the two is that the available balance for a HELOC is based on your home equity. For homeowners, the equity you have in your home is the difference between what your home is worth and what you owe. Essentially, it is the amount of your home that you have already paid for.

How Much Can I Borrow?

Let’s break it down. If your home is worth $200,000 and you still owe $120,000 on your loan, your equity is $80,000.

Most lenders allow you to borrow up to 80% of the value of your home. Using the example from earlier, 80% of $200,000 would be $160,000. Since $120,000 is still owed on the loan, we subtract that to get your total available credit line of $40,000.

What can a HELOC do for you?

Now that we know what a HELOC is, let’s talk about how you can use it!

Like we mentioned earlier, HELOCs are commonly used to help with home improvement projects. This could include installing a pool, replacing your roof, renovating your kitchen, or any other home improvement project.

That’s not all you can use it for though! You can also use a HELOC to fund a vacation, pay medical expenses, put a down payment on a second home or investment property, or to consolidate debt! The balance is available to use for whatever is important to you.

What is the application process like?

Like a mortgage loan, a home appraisal is needed to determine the value of your home, so we can find how much equity you have in it. Your loan officer will look at your credit report, existing debts, income, and employment history to determine your eligibility. Once you are approved, we allow members to sign the majority of their closing paperwork electronically so the in-person portion of the closing will take less than 20 minutes! There are also closing costs for a HELOC, but they are much lower than those for mortgages.

Contact us:

If you still have questions about HELOCs or want to talk to someone about how you could use one, the FCCU Mortgage Loan team is here to help! We’re happy to help you every step of the way, even if you’re just looking for more information. Give our Mortgage Loan Officers a call at 920-563-7305 or click here to send us an email.

If you’re ready to get started, you can apply online today at!

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