How to Obtain a Home Equity Line of Credit

How to Obtain a Home Equity Line of Credit
  • Opening Intro -

    A home equity line of credit (HELOC) is type of revolving credit.

    When choosing a HELOC, your home serves as collateral the moment funds are withdrawn from your credit line.


If you have built up equity in your home and have good credit, a HELOC can be easy to obtain. But first, you will want to get organized and develop a plan to help you secure funding from your bank or other financial institution.

1. Talk with your accountant. You may think that a certain, low-rate HELOC is the best approach for you, but your accountant may not share that opinion. For some homeowners the tax advantages of a HELOC may not be beneficial while a home equity loan (HEL) or other financing arrangement may pay off in the long run. Consult with your financial adviser to come up with a borrowing strategy with the best tax implications.

2. Assess your needs. Your financial adviser will likely encourage you to borrow only what you need. This means developing a budget outlining how much money to access. Although a HELOC does not require you to tap all of your available funds, you may want to consider a line only large enough to cover the cost of renovations or other work you want to have done on your home.

3. Shop around for credit lines. Your financial institution and your mortgage broker are two sources to explore for your HELOC. You will also want to compare their rates with what other lenders have to offer which means expanding your search accordingly. Most lines of credit offer variable interest rates; compare those rates along with fees and closing costs to determine the best HELOC for you. Have potential lenders explain the terms of their contracts; negotiate for a lower rate or fees wherever possible.

4. Apply for a HELOC. Once you have found the HELOC you want, then apply for it. Your lender will obtain your credit information before granting approval and may ask for other documentation prior to closing.

5. Close on your credit line. Once you are satisfied with the terms of your line of credit, then arrange with your lender to close the deal. Consult with your financial adviser as needed.


The Truth in Lending Act (TLA) may allow you to cancel your HELOC within three business days if you change your mind. Your contract should explain the procedure for invoking a rescission.


Be careful of lines of credit with an initial teaser rate. You may pay more for your HELOC over the long term once the rate resets.

See AlsoSayEducate: How to Get Your Home Equity Line of Credit



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Categories: Home Financing

About Author

Matthew C. Keegan

Matt Keegan is a freelance writer and editor as well as publisher of "Auto Trends Magazine", an online publication. Matt covers campus, consumer, business and financial topics on various websites and weblogs, and has been published in the "Houston Chronicle", "Sam's Club Magazine" and "Wisconsin Golfer".