Chicago Mortgage

A home equity line of credit, or HELOC, is a secondary mortgage loan set up as a line of credit that lets homeowners withdraw funds for a variety of purposes. These mortgage loans are used to fund sporadic needs such as debt reduction, home improvements, college expenses, etc.

HELOC's have a withdraw period, wherein the borrower can draw on the line, and a repayment period, in which the funds must be repaid. Standard withdrawal periods are five to ten years. On the other hand, repayment periods are extended - usually ten to twenty years. The distinction between the two periods is that borrowers are only obligated to pay interest in the withdrawal period, whereas the repayment period includes a payment of interest and principle. Home equity lines of credits vary, and some require repayment of the entire balance once the initial withdrawal period ends.