A home equity line of credit, also known as a HELOC, is a line of credit secured by your home that gives you a revolving credit line to use for large expenses or to consolidate higher-interest rate debt on other loans such as credit cards. With a HELOC you’re borrowing against the available equity in your home and the house is used as collateral for the line of credit. As you repay your outstanding balance, the amount of available credit is replenished – much like a credit card.
A typical HELOC has a variable rate, meaning the interest you pay on the balance you owe can rise and fall based on market conditions.
A HELOC is much like a credit card – you can use what you need, when you need, and you don’t have to use it right away. The most common uses for a HELOC are improving and upgrading your home, accessing lower interest rates on credit, or consolidate outstanding debts.
You can calculate the value of your home equity by subtracting the amount you owe on all loans secured by your house from its appraised value. This includes your primary mortgage as well as any home equity loans or unpaid balances on home equity lines of credit. See equity calculator.
An automated valuation model is used to estimate the value of your home. In some cases, an appraisal could be required.
To calculate your combined loan to value (CLTV) add your current loan balance as well as your desired Hitch HELOC amount together. Divide this summed balance by your home's appraised value. Multiply by 100 to convert this number to a percentage. Hitch is able to lend up to 95% of your home's appraised value.
A full draw is when the total amount borrowed is fully drawn at the time of closing. So, if you request a $100,000 HELOC, the full balance will be drawn on the closing date.