What is a HELOC?

So I looked up heloc and found this. HELOC is an abbreviation of Home Equity Line of Credit. Having a mortgage I understood what home equity was, but what was different between my typical mortgage, and a home equity line of credit?

It seems that a generic home mortgage has one purpose, to borrow money for purchasing a house that you also use as collateral for that mortgage.

A home equity loan line of credit means you can borrow money from a bank against the established equity you have in your home. Now the home equity is simply the value of your home, minus and leans, or mortgages against the property. As for heloc versus home equity loan, unlike a regular home equity loan, a home equality line of credit is a line of credit, so you don't have to borrow the money yet, just have it in reserve. It's there like a secured loan waiting to happen. Nice thing about a heloc, the money is in reserve, meaning that you don't have to pay any monthly payments, till you actually use the money, and your monthly amount is based on how much you have borrowed. I found this interesting.

Now I wondered, if you seem to be carrying a balance on your heloc, what do you do? What to do about heloc balance, seemed also interesting. Since a home equality line of credit is very flexible for the borrower, it is also flexible for the lender, the rates fluctuation with the market. So, if you find yourself with continuous balance, and no longer need to borrow against you home equity, should you just wrap up the heloc with a standard home equity loan? Home equity loan rates seem slightly better than HELOC rates, plus you can get the home equity loan rate locked into a fixed term. Add in you can set up length of payment with a home equity loan, you can better balance your bills this way.

As for me, energy efficiency has been always my issue. If I can improve my homes energy efficiency, I can reduce my long term bills. I was looking into a kind of energy efficient mortgage plan. Meaning if I borrow money against my home equity, and lock down a mortgage rate, while using the money to make home more energy efficient, I can save money in the long run. If I can gain back 100% of the money I invest at today's energy costs, and lock in a fixed energy efficient mortgage, while energy rates increase my energy efficient mortgages doesn't, further saving me money.

I don't think I need to point out the power a heloc and money from a mortgage applied to energy savings can have on you financial future; so I plan on further looking into the option available in this day and age of flocks of money lenders. Home equity is mine, and having it locked up inside a home, is useless to me. I mean if I own a home 50% mortgaged, or 100% mortgaged and housing prices go up 10%, did I make any money on my equity? No I still only had my house increase in value 10% based on its value, not how much I owe.

Now of course I've only been thinking out loud, and I want to point out any information or decisions I have come to, are based on my own financial situation. Understanding a Home equity line of credit, and energy efficient mortgages, can be difficult to apply to your situation, so seek help from a financial planner. Your financial planner will be your best source of information about how your home's equity can be used to better plan your future.