Finance
A home equity line of credit (HELOC) is BEST described as:
AA fixed-rate second mortgage
BA revolving line of credit secured by the borrower's home equity✓ Correct
CA government-backed refinancing program
DA loan to purchase investment property
Explanation
A HELOC is a revolving credit line secured by the borrower's home equity, similar to a credit card. Borrowers can draw funds, repay them, and draw again up to the credit limit during the draw period.
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Key Terms to Know
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.
AmortizationThe gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.
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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