A home equity line of credit, "HELOC", is a second mortgage loan made to homeowners to be used on an as-needed basis. A lender, such as a bank, will approve a borrower for a specified amount based on the equity in their home and all the necessary paperwork is signed to authorize the loan.
The proceeds from a HELOC are intended be used to make home improvements, or anything else such as medical expenses, college tuition, or unexpected expenses, etc. During the Real Estate "Boom" of 2003-2007 many borrowers were taking out risky HELOCs as downpayments to purchase investment homes... and then the market Bust arrived and these borrowers were forced into foreclosure, bankruptcy and short sales.
Right now in Canada, borrowers are doing the same thing at the top of their Real Estate market. The entertainer Pitbull actually hosted an investor Real Estate conference in Toronto (http://www.zerohedge.com/news/2017-04-11/tony-robbins-pitbull-and-5-other-signs-toronto-real-estate-about-crash).
However, if you intend to use a HELOC with caution and don't overburden yourself, this line of credit amount is available to the borrower with equity and no interest is due until some or all the money is used. When the money is paid back, the line of credit is again available in full to the borrower. The specifics of the repayment will depend on the HELOC lender. It may require interest only or it may require amortized payments of principal and interest. Unlike personal credit card interest, the interest on a HELOC may be tax deductible. Your tax advisor will be able to let you know about your situation.
Rates and fees can vary widely on HELOC loans. Borrowers should shop around, compare and get recommendations before deciding on a lender.
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