What is a home equity line of credit (HELOC)?

A home equity line of credit (HELOC) is a revolving credit line that allows homeowners to borrow against the equity they have built up in their homes. It is secured by the value of the property, which means that the lender has a claim on the home if the borrower fails to repay the loan. Unlike a traditional mortgage that provides a lump sum payment with fixed repayment terms, a HELOC enables borrowers to access funds as needed, often through checks or a credit card linked to the line of credit.

This flexibility allows homeowners to borrow funds for various purposes such as home renovations, education expenses, or debt consolidation. The amount that can be borrowed is typically based on the equity in the home and the lender’s assessment of the borrower’s creditworthiness.

The other options do not accurately describe a HELOC. A fixed-rate mortgage is a different financial product with established repayment terms and does not offer the revolving credit feature. Grants for first-time homebuyers do not involve borrowing against home equity but are designed to assist with down payments. Lastly, a type of savings account for homeowners does not relate to borrowing or credit lines but rather pertains to saving money. Thus, the identification of a HELOC as a revolving credit line secured by home equity is accurate and highlights