A home equity credit line is a variable rate second mortgage which uses the equity in your home as security for the loan. The interest rate follows the movements of an index, in most cases the prime rate. A margin or markup is then added to the index to arrive at the adjusted rate. Unlike traditional second mortgages, where the entire loan amount is given in one lump sum, approved homeowners are given access to a revolving line of credit which may be drawn upon by check, or in some cases, a credit card.
Interest is paid only on the borrowed funds.
Return to Top Loan Description Variations among home equity credit lines allow you to choose the product which best fits your needs. On the following pages is a clear description of the terms of these loans, and the choices available to borrowers. Some lenders offer the loan to owners of cooperatives, with certain restrictions. Also, some lenders do not require that the home be owner-occupied to qualify. The index is the economic indicator for the loan and may increase or decrease reflecting market conditions.