Using the security of equity in your home, a home equity credit line is a revolving credit line account. This type of loan has a variable interest rate based on the prime rate. The loan can be active for a long period, most typically for 10 to 15 years. During this period, you have the option of making interest-only payments or regular amortized payments. At the end of the line of credit period, the existing balance may be converted to a standard loan.

The major difference between a home equity credit line and a home equity loan is that with a credit line, you withdraw funds only as needed. For example, the line of credit may be for $80,000, but you only need $20,000 for a down payment on a great investment property I found for you. You can draw on the line of credit for only the $20,000 needed and pay interest on the actual amount you have just used.

Many lenders will extend a credit line of up to 100% of the value of your house. A home equity credit line is available for owner-occupied single-family homes, condominiums, and townhomes. The interest may be tax deductible because an equity credit line is secured by your primary home, but as always check with your tax advisor.

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