How is a home equity line of credit (HELOC) defined?

A home equity line of credit (HELOC) is best defined as a revolving credit line secured by home equity. This means that a HELOC allows homeowners to borrow against the equity in their home, which is the difference between the home’s market value and any outstanding mortgage balances. The credit line is "revolving," similar to a credit card, allowing borrowers to draw from the line as needed, up to a specified limit, and pay it back over time.

One of the key features of a HELOC is its flexibility; borrowers can access funds when they need them and only pay interest on the amount they have drawn. This makes it particularly useful for large expenses such as home improvements, education costs, or consolidating higher-interest debt. The fact that it is secured by the equity in a home often means that the interest rates are lower than those of unsecured loans, which can be an attractive option for borrowers.

In contrast, the other definitions provided do not capture the essence of a HELOC. For instance, a fixed amount loan based on the full home value refers to a traditional mortgage or perhaps a home equity loan, which provides a lump sum payment instead of a revolving credit line. A mortgage for purchasing new homes does not relate to the borrowing