A Line of Credit is not a typical loan, where a lump sum is lent in advance. Instead, the lender provides a source of funds which is made available for when the borrower requires, and Interest is paid only on the money that the borrower withdraws.
The loans are called a Home Equity Line of Credit (HELOC). They are secured against the equity of an existing property you own, which becomes the collateral. Equity is calculated by subtracting the amount left to repay on your mortgage from the current market value of your home.
A HELOC is usually in the second-line position on your home, directly after your first mortgage. Home Equity Lines of Credit are usually open for a 10-year term, but this can vary between lenders. Each month, as a minimum, you will be required to make an interest only payment. However, in order to reduce and pay off the equity line balance you will need to repay more than the interest only payment each month. As with any loan, amounts paid above and beyond the interest payment will directly be deducted from the principal balance.
The calculator will also show the effects of making additional payments toward principal on a monthly, yearly or one-time basis. The "Principal Balances" chart shows the remaining balances owed every 12 months after the first additional payment. Click "view report" to see the full breakdown.