Finance
A 'home equity line of credit' (HELOC) differs from a home equity loan in that:
AA HELOC provides a lump sum at closing; a home equity loan is revolving credit
BA HELOC is a revolving line of credit; a home equity loan is a lump-sum disbursement at a fixed rate✓ Correct
CHELOCs are only available to commercial borrowers
DA home equity loan has no interest; a HELOC does
Explanation
A HELOC is a revolving line of credit (like a credit card) secured by home equity, with variable rates and draw periods. A home equity loan disburses a fixed lump sum at closing with a fixed interest rate and payment schedule.
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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.
AmortizationThe 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.
Pre-ApprovalA lender's conditional commitment to loan a specific amount to a borrower, based on verified income, credit, and assets.
Math Concepts
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