Home owner lines of credit (also known as home equity credit lines or HELOCs) are similar to conventional second mortgages except that they enable the home owner to borrow money only as it is needed, up to a specific limit. Money is borrowed from the home’s equity; the amount of its value that is not currently mortgaged.

After obtaining a credit line, borrowers can use a card and/or checks to retrieve money from them. Wachovia’s web site indicates that they offer checks for this purpose in all areas, and a Visa card in states with laws which permit this technique. Credit lines of this type most frequently tend to have adjustable interest rates, but some fixed-rate options are available as well.

Home owner lines of credit vary with regard to their length before expiration and method of repayment. The length, or “draw period”, often lasts for about ten to fifteen years. According to federalreserve.gov, the owner may be allowed to renew the line after it expires or be required to repay it. Some lenders request repayment over a specific amount of time, while others demand that all owed money be repaid upon expiration of the line.

Additional costs also apply to most home owner lines of credit, beyond repaying the interest and principal. The Federal Trade Commission’s web site indicates that such expenses may include fees which are charged yearly and/or every time funds are drawn from the line, as well as initial closing costs. It also points out that some lending institutions provide low “introductory” interest rates which rise after a specific number of months.

Lines of credit offer an advantage to home owners in that they don’t have to borrow (and pay interest on) money they won’t actually need if expenses are lower than previously anticipated. Also, they don’t have to start paying interest on money until it is actually spent. Compared to conventional credit cards, HELOCs typically have lower interest rates and higher spending limits, but usually charge more fees.

HELOC interest rates are generally about four to eight percent, but vary depending upon the borrowing limit, home owner’s FICO score, and other factors. Basically, home owner lines of credit have several positive aspects, but potential borrowers should first carefully consider all details about the fees and repayment terms which apply.