HELOCs
Equity credit lines
HELOCs are home equity lines of credit—loans that let homeowners borrow against the equity they've built in their property.
Unlike a traditional loan with a lump sum, a HELOC works like a credit card: you draw funds as needed up to a limit, paying interest only on what you use.
They took out a HELOC to finance the kitchen renovation.
Ownership portion of residence
- credit linePre-approved borrowing limit
- second mortgageSubsequent lien on property
- variable rateAmount that fluctuates
- revolving creditReusable loan with limit
loan-to-value · collateral · principal · interest-only · credit limit · borrowing power · secured loan · debt consolidation
Yearly borrowing cost
- prime rateBank's benchmark lending percentage
- marginEdge of a page
- capsHeadwear or upper limits
- floorsWalking surfaces inside
annual fee · closing costs · prepayment penalty · balloon payment · freeze · reduction · default · underwriting
Upgrading one's residence
- emergency fundReserve for unexpected expenses
- tuition paymentEducational cost remittance
- medical expensesFees for treatment
- investment capitalFunds allocated for ventures
liquidity · bridge loan · project funding · financial cushion · retirement planning · wealth management
Excessive debt accumulation
- negative equityOwing more than owned
- foreclosureLender seizes mortgaged property
- underwater mortgageLoan exceeding property value
- credit freezeRestriction on credit inquiries
home equity
Ownership portion of residence
- credit linePre-approved borrowing limit
- second mortgageSubsequent lien on property
- variable rateAmount that fluctuates
revolving credit · loan-to-value · collateral · principal · interest-only · credit limit · borrowing power · secured loan · debt consolidation · cash-out
APR
Yearly borrowing cost
- prime rateBank's benchmark lending percentage
- marginEdge of a page
- capsHeadwear or upper limits
floors · annual fee · closing costs · prepayment penalty · balloon payment · freeze · reduction · default · underwriting · appraisal
home improvement
Upgrading one's residence
- emergency fundReserve for unexpected expenses
- tuition paymentEducational cost remittance
- medical expensesFees for treatment
investment capital · liquidity · bridge loan · project funding · financial cushion · retirement planning · wealth management
overleveraging
Excessive debt accumulation
- negative equityOwing more than owned
- foreclosureLender seizes mortgaged property
- underwater mortgageLoan exceeding property value
credit freeze · market volatility · debt trap · credit damage
HELOCsinstallment loans
Loans repaid in fixed payments
fixed-rate mortgages · auto loans · term loans · student loans · home equity loans
HELOCspayday loans
Short-term high-interest borrowing
unsecured loans · personal loans · credit card debt · credit cards · unsecured debt
HELOCssavings accounts
Interest-bearing bank deposits
investment portfolios · home equity · cash reserves · emergency funds · assets