A line of credit that is secured by a borrower’s home equity. As a security, it gives a homeowner borrower a revolving line of credit to finance unusual expenses or to refinance debt on other loans such as short-term loans, credit cards, etc. This line of credit is a second mortgage that allows a homeowner to obtain financing from the market based on the value of home equity.

By a home equity loan, a homeowner borrower can secure a lump sum of money against his/ her home’s existing equity. However, a home equity line of credit (HELOC) can leverage home equity but in the form of an open line of credit. The homeowner can borrow up to a pre-determined amount as needed.