A Home Equity Line of Credit (HELOC) is a type of loan that allows homeowners to borrow money against the equity in their homes. Equity is the difference between the value of the home and the outstanding balance on the mortgage. With a HELOC, the borrower has access to a revolving line of credit that can be used as needed up to a certain limit, similar to a credit card.

HELOCs typically have a variable interest rate, which means the interest rate can change over time based on market conditions. The interest rate on a HELOC is usually lower than other types of loans, such as credit cards, because the home is used as collateral.

The draw period of a HELOC is the time during which the borrower can withdraw funds from the line of credit. The draw period typically lasts 5-10 years, during which the borrower can withdraw funds as needed. After the draw period, the borrower enters the repayment period, during which they must make payments on the outstanding balance, plus interest. The repayment period typically lasts 10-20 years.

Overall, a HELOC can be a useful tool for homeowners who need to access cash for home improvements, debt consolidation, or other expenses. It’s important to carefully consider the terms and conditions of a HELOC before taking one out, and to work with a reputable lender or mortgage broker to ensure you are getting the best deal for your financial situation.