Finance
A home equity line of credit (HELOC) is best described as:
AA fixed-rate second mortgage with equal monthly payments
BA revolving line of credit secured by the equity in a home✓ Correct
CA government-guaranteed loan for home improvements
DA bridge loan to cover the gap between two property purchases
Explanation
A HELOC is a revolving line of credit secured by the homeowner's equity. The borrower can draw funds up to a credit limit, repay, and borrow again — similar to a credit card but secured by real estate.
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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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