FinanceIntermediateAlabama Exam

A home equity line of credit (HELOC) is best described as:

ASimply a fixed-rate second mortgage disbursed as a single lump sum, the opposite of the revolving variable-rate credit line a HELOC actually is

BA revolving line of credit secured by the home's equityCorrect

CAn unsecured personal loan using the home as collateral

DA government program for low-income homeowners

Why A revolving line of credit secured by the home's equity Is Correct

Answer B: A revolving line of credit secured by the home's equity

A HELOC is a revolving line of credit secured by the borrower's home equity. Like a credit card, the borrower can draw funds as needed (up to the limit), repay, and redraw during the draw period.

Exam Tip: Finance

Finance questions often involve calculations. Master the T-bar method, understand the difference between conventional and government-backed loans, and know key ratios like LTV and DTI.