Finance
A Colorado property owner with significant equity wants to access funds without selling their home. They could use a:
AHome Equity Line of Credit (HELOC)✓ Correct
BPurchase money mortgage
CConstruction loan
DBridge loan for another purchase only
Explanation
A HELOC allows property owners to borrow against their equity as needed, up to an approved credit limit. It functions like a revolving credit line secured by the home's equity.
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Key Terms to Know
Loan-to-Value Ratio (LTV)
The ratio of a mortgage loan amount to the appraised value or purchase price of a property, expressed as a percentage.
Debt-to-Income Ratio (DTI)A lender's measure of a borrower's monthly debt obligations relative to their gross monthly income, used to evaluate loan eligibility.
Discount PointsPrepaid interest paid to a lender at closing to reduce the mortgage interest rate, with each point equal to 1% of the loan amount.
Private Mortgage Insurance (PMI)Insurance required by lenders on conventional loans with less than 20% down payment, protecting the lender — not the borrower — against default.
Math Concepts
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