Finance
A Vermont home equity line of credit (HELOC) uses:
AThe borrower's retirement savings as collateral
BThe equity in the borrower's home as collateral for revolving credit✓ Correct
CA co-signer's property as collateral
DFuture rental income as the primary qualification
Explanation
A HELOC uses the borrower's home equity as collateral, providing a revolving line of credit that can be drawn upon as needed, up to the credit limit. It is secured by a mortgage or deed of trust.
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Key Terms to Know
Deed of Trust
A security instrument used in many states instead of a mortgage, involving three parties: borrower (trustor), lender (beneficiary), and a neutral trustee.
DeedA written legal instrument used to transfer ownership of real property from one party (grantor) to another (grantee).
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.
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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