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Glossary
Annual membership or participation fee
An amount that is charged annually for having the line of credit available.
It is charged regardless of whether or not you use the line.
Annual percentage rate (APR)
The cost of credit on a yearly basis expressed as a percentage.
Application fee
Fees that are paid upon application. An application
fee may include charges for property appraisal and a credit report.
Balloon payment
A lump-sum payment that you may be required to make
under a plan when the plan ends. Cap. A limit on how much the
variable-interest rate can increase during the life of the plan.
Closing costs
Fees paid at closing, including attorneys' fees, fees
for preparing and filing a mortgage, for taxes, title search, and
insurance.
Credit limit
The maximum amount that you can borrow under the home equity plan.
Equity
The difference between the fair market value (appraised value)
of your home and your outstanding mortgage balance.
Index
The base for rate changes that the lender uses to decide how
much the annual percentage rate will change over time.
Interest rate
The periodic charge, expressed as a percentage, for use of credit.
Margin
he number of percentage points the lender adds to the index
rate to determine the annual percentage rate to be charged.
Minimum payment
The minimum amount that you must pay (usually monthly)
on your account. In some plans, the minimum payment may be "interest
only." In other plans, the minimum payment may include principal and
interest.
Points
A point is equal to one percent of the amount of your credit
line. Points usually are collected at closing, and are in addition to
monthly interest.
Security interest
An interest that a lender takes in the borrower's
property to assure repayment of a debt.
Transaction fee
A fee charged each time you draw on your credit line.
Variable rate
An interest rate that changes periodically in relation
to an index. Payments may increase or decrease accordingly.
The above text was extracted directly from
What You Should Know About Home Equity Lines of Credit--
When Your Home Is On The Line:
As published by the Federal Reserve Board. This presentation of the information is
copyrighted ©1997 by Mortgage Market Information Services, Inc.
Pg 1 -- What is a home equity line of credit?
Pg 2 -- What should you look for when shopping for a plan?
Pg 3 -- Costs to Obtain a Home Equity Line
Pg 4 -- How will you repay your home equity plan?
Pg 5 -- Comparing a line of credit/traditional 2nd mtg.loan
Pg 6 -- Disclosures from Lenders
Pg 7 -- Glossary
Pg 8 -- Where to Go for Help
Pg 9 -- CHECKLIST
Back to Bad Credit Home
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