Finance
A home equity line of credit (HELOC) differs from a traditional mortgage because:
AA HELOC is not secured by real estate
BA HELOC is a revolving line of credit secured by home equity, allowing the borrower to draw and repay as needed✓ Correct
CA HELOC always has a fixed interest rate
DA HELOC requires no qualification process
Explanation
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, repay them, and draw again up to the credit limit.
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Key Terms to Know
Discount Points
Prepaid interest paid to a lender at closing to reduce the mortgage interest rate, with each point equal to 1% of the loan amount.
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.
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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