How does TILA define a Home Equity Line of Credit (HELOC)?

The definition of a Home Equity Line of Credit (HELOC) according to the Truth in Lending Act (TILA) specifies that it is an open-end loan that is secured by the equity in real estate. This means that a HELOC allows homeowners to borrow against the available equity in their home, which is the difference between the home's market value and the outstanding mortgage balance.

The open-end nature of a HELOC provides borrowers with the flexibility to withdraw funds as needed up to a certain limit, similar to a credit card. This structure allows homeowners to access capital for various purposes, such as home improvements, education expenses, or debt consolidation, making it a versatile financial tool.

In contrast to other choices, which describe different types of loans or investment scenarios, the correct answer accurately reflects the nature of a HELOC as outlined in TILA, highlighting its characteristics related to equity and the borrowing process. This clarity helps borrowers understand their options when considering leveraging home equity for financial needs.