What is a Home Equity Line of Credit and how does it work?

What is a Home Equity Line of Credit and how does it work?

A home equity line of credit (HELOC) is a revolving line of credit secured by the equity you’ve established in your home. Since the credit provided to you by a lender is secured by your home, the interest rates on HELOCs are often lower than unsecured loans such as student loans, credit cards, and other common types of loans.

The way it works is that an NB HELOC customer applies for a line of credit based upon available equity in their home. The credit line is revolving, performing similarly to how a credit card works. This is to say that as you take a draw on your NB HELOC, your available credit is reduced by that draw amount. As you make payments on your outstanding balance, the available credit increases in lockstep. This allows you to continually access and repay the funds throughout the duration of what is known as the draw period. Once your draw period ends, you enter into a repayment period. At Needham Bank, our NB HELOC draw and repayment periods are both 10 years.

For additional questions or help with obtaining an NB HELOC, please contact one of our Residential Lenders directly.