HELOC
Definition
A HELOC, or home equity line of credit, is a revolving credit line secured against your home. You draw from it as needed over a set period rather than receiving one lump sum.
It behaves more like a credit card than a loan. A limit is set, you borrow what you need, and interest is charged only on what has been drawn.
The schedule usually has two stages. During the draw period payments are often interest only. When the repayment period starts, the balance amortizes and payments step up, sometimes sharply.
Rates are commonly variable, so the cost of an outstanding balance can move. Because the line is secured on the home, missed payments put the property at risk.