Finance
In Tennessee, a 'home equity loan' differs from a HELOC in that a home equity loan:
AIs a revolving line of credit
BDisburses a lump sum at closing with fixed payments over a set term✓ Correct
CDoes not use the home as collateral
DIs always at a variable interest rate
Explanation
A home equity loan (second mortgage) provides a lump sum at closing with fixed principal and interest payments over a set term. A HELOC is a revolving line of credit.
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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.
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.
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.
Math Concepts
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