What Is Home Equity Withdrawal?

If you are a homeowner, you may be able to get a home equity line of credit (HELOC) from a bank. There are certain qualifications and guidelines you must abide by. Before taking out a HELOC loan, you should get all the information that's available so that you can determine if a HELOC is right for you.

Equity

HELOC is a loan from a bank that enables you to establish a line of credit based on the equity in your home. Your home becomes the collateral for the loan.

Withdrawal

If you want to withdraw money from your line of credit, there are certain ways you can go about this. You can write out one of the checks issued with the loan or you can visit a branch office. When you take out money, this is considered a withdrawal.

Interest Accrues

Once you withdraw money from your line of credit, interest starts to accrue on the entire balance. You have to make payments monthly. Generally, payments are interest-only payments.

Features

The value of your home and the balance on your mortgage will determine how much equity you have in your home. You cannot withdraw an amount greater than your line of credit. If the value of your home decreases, it will cause the equity in your home to decrease.

Purpose

You can use an equity withdrawal for any purpose including home improvements, consolidation or tuition expenses. If you purchase a car with your home equity line, the interest you pay is tax deductible.

Resources

• HELOC loans