What Are Home Equity Line of Credit Payment Terms?

If you are a homeowner looking to take out a loan, you may qualify to take out a home equity loan or line of credit. The interest on either of these loans is tax deductible, making them more appealing than standard, non-deductible loans. Home equity lines typically offer more freedom than home equity loans, particularly when it comes to payment and repayment terms.

Interest-Only Payment

The interest-only option allows you to pay only the interest accrued on your line. However, this payment method means that you aren't lowering your balance.

Variable Payment

The variable payment method may allow you to pay a percentage of your balance (the amount you owe, not your limit) each month. This includes principal (the amount you owe) and interest.

Fixed Payment

If you have maxed out your limit, you may pay via the fixed payment method, which requires you to pay a percentage of your limit, both principal and interest.

Variable Interest

If your home equity line has a variable monthly payment, you could pay 10 percent in interest one month and 15 percent interest the next month.

Considerations

While some lenders allow a long repayment period (as much as 15 years) after the line has ended, keep in mind that when your line ends, you may have to pay the entire balance.