HELOC is an abreviation for Home Equity Line Of Credit. It is a loan that uses a line of credit to borrow sums that total no more than the credit limit, similar to a credit card.

Home Equity Line of Credit funds can be borrowed during the draw period, typically 5 to 25 years. Repayment is of the amount drawn plus interest. A Home Equity Line of Credit may have a minimum monthly payment requirement, often interest only; however, the debtor may make a repayment of any amount so long as it is greater than the minimum payment, but less than the total outstanding. The full principal amount is due at the end of the draw period, either as a lump-sum balloon payment or according to a loan amortization schedule.

Most Home Equity Line of Credits are second mortgages. In recent years an increasing number, are first mortgages.

Because the balance of a Home Equity Line of Credit may change from day to day, depending on draws and repayments, interest on a HELOC is calculated daily rather than monthly.

Get more information on Home Equity Line of Credit in the Real Estate Forum.