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====== Home Equity Line of Credit (HELOC) ======

A **Home Equity Line of Credit (HELOC)** is a form of **open-end credit** secured by the borrower’s **equity in real property**.

===== Key Characteristics =====
  * Revolving line of credit
  * Secured by a **deed of trust or mortgage**
  * Credit limit based on **available equity**
  * Interest paid only on the amount borrowed
  * Typically has **draw** and **repayment** periods

===== How a HELOC Works =====
  * Borrower is approved for a maximum credit limit
  * Funds may be drawn as needed during the draw period
  * Balance can increase or decrease
  * After draw period, repayment begins

===== HELOC vs Closed-End Loan =====
  * **HELOC**
    * Open-end credit
    * Variable interest rate
    * Reusable funds

  * **Home Equity Loan**
    * Closed-end
    * Fixed loan amount
    * Fixed payment schedule

===== Position =====
  * Often recorded as a **second trust deed**
  * Subordinate to the first mortgage or deed of trust

===== Consumer Protections =====
  * Subject to **TILA and Regulation Z**
  * Includes **right of rescission** (3 business days) for owner-occupied residences

===== Exam Tip =====
  * HELOC = **open-end mortgage**
  * Balance may increase over time
  * Interest applies only to amounts actually borrowed