How does a home equity line of credit work?

A home equity line of credit (HELOC) is a revolving form of credit secured by your property. You can borrow as little or as much as you need, up to your approved credit line and you pay interest only on the amount that you borrow. You can take advantage of flexible repayment terms, and you can use the credit again as you pay down the balance.

Here are some of the most commonly asked questions about HELOCs.

What can a home equity line of credit be used for?

A HELOC is well suited for large, recurring expenses, such as your child’s college tuition or a remodeling project that may last several years. HELOCs also are ideal for unexpected home emergencies or medical expenses.

How do you find out how much equity you have in your home?

Your equity is the share of your home that you own versus what you owe the lender on your mortgage. For example, if your home is worth $300,000 and you have a mortgage balance of $150,000, your equity in the home is $150,000.

How long do you have to repay a HELOC?

HELOC funds are borrowed during a “draw period,” typically 10 years. Once the 10-year draw period ends, any outstanding balance will be converted into a principal-plus-interest loan for a 20-year repayment period.

Can I fix my outstanding balance into a loan?

U.S. Bank offers a Fixed Rate Option that allows you to convert all or any portion of your credit line balance into an installment loan with a fixed interest rate and a fixed payment schedule.

Can you sell your house if you have a HELOC?

You don’t have to pay off your home equity line or other liens in order to list your home for sale. At your home’s sale closing, any creditors holding liens on your home’s title will be paid off from the proceeds of the sale.

Are there closing costs on a HELOC?

There are no application fees or closing costs to open your U.S. Bank HELOC account. Some loans may have an origination fee if elected by the borrower.