Finance
A 'home equity line of credit' (HELOC) is best described as:
AA. A fixed-rate second mortgage with a lump sum disbursement
BB. A revolving line of credit secured by the borrower's home equity✓ Correct
CC. A government-backed refinance program
DD. A construction loan for home improvements
Explanation
A HELOC is a revolving line of credit secured by the equity in the borrower's home. The borrower can draw funds as needed up to the credit limit during the draw period and repay over the repayment period.
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Key Terms to Know
Amortization
The gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.
Adjustable-Rate Mortgage (ARM)A mortgage with an interest rate that changes periodically based on a financial index, usually after an initial fixed-rate period.
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.
Math Concepts
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