FinanceIntermediateArizona Exam

In Arizona, a 'HELOC' (home equity line of credit) compared to a 'home equity loan' (second mortgage) differs primarily in that:

AA HELOC is a revolving credit line with variable rate; a home equity loan is a fixed-amount lump sum typically at a fixed rateCorrect
BA home equity loan is a revolving credit line with a variable rate tied to the prime rate; a HELOC is a lump-sum disbursement at a fixed interest rate
CBoth instruments provide a revolving credit line secured by home equity; the only difference is that a home equity loan requires a minimum 50% withdrawal of the credit limit
DHELOCs can only be secured by the borrower's primary residence; home equity loans may be secured by any residential property regardless of occupancy status

Why A HELOC is a revolving credit line with variable rate; a home equity loan is a fixed-amount lump sum typically at a fixed rate Is Correct

Answer A: A HELOC is a revolving credit line with variable rate; a home equity loan is a fixed-amount lump sum typically at a fixed rate

A HELOC is revolving (like a credit card), with a draw period during which the borrower can borrow, repay, and borrow again, typically at a variable rate. A home equity loan (second mortgage) provides a lump sum at a fixed rate with set monthly payments.

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.

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