A home equity line of credit has several unique characteristics. Here is a quick overview:
- During the initial years of the loan, you are usually only required to make interest-only payments and you only make payments if and when you draw money from your account.
- After the initial years of the loan, the full balance is amortized and paid off over remaining years. An initial minimum draw (taking the money in cash) is sometimes required at closing. However, Quicken Loans does not require an initial minimum draw on HELOCs.
- Like any standard loan, the interest rate and annual percentage rate (APR) are calculated based your credit score and the combined loan-to-value ratio (CLTV). Generally, the lower CLTV ratio you have, the lower your interest rate and APR will be.
- Your interest rate adjusts as the result of an index plus a margin . The index, which can change, is the Prime Rate as published in the Wall Street Journal at the time of the adjustment period. The margin, which can not change, will be determined at the time of your application.
