equity credit line
Definition
Noun: A type of loan where the borrower uses the equity (the current market value minus any outstanding mortgage debt) in their home as collateral. The lender establishes a maximum credit limit, and the borrower can access funds as needed, similar to a credit card but secured by real estate.
Usage
This term refers specifically to the financial product itself. * Homeowners can use an equity credit line to finance major expenses like home renovations or education. * The bank approved her for a $50,000 equity credit line based on her home's appraised value. * Interest rates for an equity credit line are often variable.
Advanced Usage
- Often abbreviated as HELOC (Home Equity Line of Credit), which is the more common industry term.
- It is distinct from a , which provides a lump sum with a fixed interest rate, whereas an equity credit line provides revolving credit with a variable rate.
- The phrase "tap into one's equity credit line" is commonly used to describe accessing the available funds.
Variants and Related Words
- HELOC (Home Equity Line of Credit): The standard acronym and full term for this product.
- Home equity: The value of the homeowner's unencumbered interest in their property.
- Line of credit: A general financial arrangement setting a maximum loan balance a borrower can access.
Synonyms
- Home equity line (informal)
- Second mortgage (this is a broader category that can include lump-sum loans; an equity credit line is a type of second mortgage)
Related Phrases
- Secured line of credit: A broader category that includes any line of credit backed by collateral, such as an equity credit line.
- Draw period: The phase during which the borrower can take money from the equity credit line.
- Repayment period: The phase following the draw period when the borrower must repay the principal and interest.
Noun
-
a loan secured by equity value in the borrower's home
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