What is a Home Equity Line of Credit (HELOC)?

A Home Equity Line of Credit (HELOC) is indeed a loan that is secured by collateral from the residence. This means that the borrower can tap into the equity they have built up in their home, using it as security for the credit line. The amount available through a HELOC is determined by the amount of equity in the home and is typically expressed as a percentage of the home's appraised value, minus any outstanding mortgage balance.

The key aspect of a HELOC is that it provides borrowers with flexible access to funds, allowing them to withdraw money as needed up to a set credit limit. This can be particularly beneficial for homeowners who want to finance home improvements, consolidate debt, or manage other large expenses while keeping their home as a financial resource.

In contrast, a loan to buy a new home typically involves a mortgage that is secured specifically for the purchase of a property. A governmental mortgage program generally refers to loans backed by governmental entities like FHA or VA, which have specific eligibility criteria and benefits. A personal loan without any collateral would not involve a home as security and is often unsecured, which carries different risk and interest rate considerations.