What Is an Equity Line of Credit?
An equity line of credit (home equity line of credit or HELOC) is a revolving credit facility secured by the borrower's home equity. The borrower can draw funds up to an approved limit, repay, and re-borrow during the draw period, paying interest only on the outstanding balance.
How HELOCs Work
- Credit limit: Based on the home's value minus the outstanding mortgage balance (typically up to 80% combined loan-to-value)
- Draw period: Usually 10 years, during which the borrower can access funds
- Repayment period: Usually 10 to 20 years after the draw period ends
- Interest rate: Typically variable, tied to the prime rate
- Payments: Interest-only during the draw period; principal and interest during repayment
Impact on Florida Property Title
- The HELOC creates a recorded mortgage lien (typically a second mortgage)
- The lien appears in title searches and title commitments
- The balance must be paid at closing when the property is sold
- The lender records a satisfaction of mortgage when fully repaid
Florida Homestead Requirements
For homestead property, both spouses must sign the HELOC mortgage and note, regardless of how title is held. Failure to obtain both signatures may render the mortgage unenforceable under Florida's constitutional homestead protections.
Related Terms
- Equity — The financial interest securing the credit line
- Encumbrance — The HELOC mortgage as a title encumbrance
- Closing Costs — Fees associated with establishing a HELOC
Barnes Walker Real Estate
Barnes Walker's real estate attorneys review HELOC documents for Florida homeowners, ensuring compliance with homestead requirements and protecting property rights. Request a legal inquiry for assistance.
Reviewed by the attorneys at Barnes Walker, Goethe, Shea & Robinson, PLLC