Finance
A home equity line of credit (HELOC) is:
AA fixed-rate mortgage secured by the borrower's equity
BA revolving credit line secured by the borrower's home equity, with variable interest rates✓ Correct
CA second mortgage with a fixed lump-sum disbursement
DA government-backed loan for home improvements
Explanation
A HELOC is a revolving line of credit secured by home equity, similar to a credit card. It typically has a variable interest rate, a draw period during which funds can be borrowed, and a repayment 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.
Discount PointsPrepaid 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.
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.
Math Concepts
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