What Are the Repayment Terms for a Home Equity Line of Credit?

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The repayment terms for a home equity line of credit generally require the borrower to pay off interest on money withdrawn from the loan for the first 10 years. After 10 years, lenders will often require any remaining principle to be paid off in the next five years. Be careful not to run up a large balance on a home equity loan with advice from a mortgage broker in this free video on home equity loans.

Part of the Video Series: Home Equity Loans & Foreclosures
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Hi this is Matt McKillen with Innovative Financial Group. The question posed to me today are what are the general repayment terms of a home equity line of credit? Well first off you have to understand that most home equity lines of credit only require a minimum interest only payment every month. Now to give you an example of how that works is if let's say you get a 20,000 dollar home equity line of credit on your home. If you don't touch it for the first six months, you obviously owe zero on it, it's just available, it's like a credit card on your house. If you do borrow money on your equity line, let's say you borrow 10,000 dollars, every 30 days your bank is going to send you a statement that basically requires that you at a minimum at least pay the interest only portion of your payment. Now most home equity lines are tied to prime, the prime lending rate. So usually banks will set the home equity line up for 15 years where what they'll do is for the first 10 years of the equity line, they'll allow you to be able to borrow against that equity line pay it back as you see fit, you can pay the principal back 30 days after borrowing it if it's a short term loan. But they'll allow you to keep going back and forth on the line for the first 10 years. After 10 years, if you do have a balance owed on that line of credit, generally what they'll do is they'll take that actual balance and set you up on a payment plan to repay that loan over the remaining 5 years. So be careful, if you have a home equity line you don't want to run that balance up to 750,000 dollars because your bank can come back after 10 years and say they want that loan paid in full principal and interest within 5 more years. So that's how the home equity line of credit works in most instances. Again my name is Matt McKillen, I'm with Innovative Financial Group.

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