Terms*

Home Equity
Line of Credit

Home Equity
Fixed Rate Loan

Your annual percentage rate may vary. With most banks, the rate is determined by adding a margin (or percentage, visit this home equity rate page for information) to the "PRIME RATE" as quoted by some financial media on a certain day of the month. For example, you may see the following:

"The rate is determined by adding a margin to the 'Prime Rate' as quoted under "Money Rates" in The Wall Street Journal on the 25th day of each month for the first regular business day thereafter."

If the "PRIME RATE" goes up, your APR will rise thus increasing your minimum payment. If the "PRIME RATE" comes down, your APR will come down thus decreasing your minimum payment.

Maximum and minimum APRs may vary as set by individual state laws. All home equity lines must list a rate cap.

You will pay interest only on the amount you borrow, not on the total credit line of your account.

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If the lending institution quotes an APR that is pegged to some index other than the "PRIME RATE ", request to view historical changes for the index rate being used. Compare this trend against the historical trends for the "PRIME RATE" to note frequency changes in APR and how high the rate has climbed.

Costs for an appraisal, title search, credit check, document handling and other similar costs the lending institutions incurs to open your equity line account or loan.

Most banks do not charge closing costs if you borrow at a certain level. However, some restrictions may apply if you close your account prior to a minimum period set by the bank.

Extended line or loan amounts may vary by lending institution. These amounts are determined by taking a percentage of the appraised value of your home and subtracting the balance owed on the existing mortgage.

For example:

Property Value: $200,000

Mortgage Balance: $120,000*

The maximum amounts you can borrow under this example at varying LTV levels is as follows:

at 70% LTV: $20,000

at 80% LTV: $40,000

at 90% LTV: $60,000

at 100% LTV: $80,000

This is calculated by taking:

Property Value
(times) % LTV
(minus) Mortgage Balance

If the above home was appraised at $1million dollars, lending institutions may limit the amount they will lend at each LTV level.

Calculate your own LTV?
see LTV calculator

* Includes first, second and all home liens

You can choose how much to pay each month when your statement comes due.

You can pay the minimum amount, the entire amount, or any amount in between.

This is one of the greatest features of the home equity line of credit.

The minimum amount required may vary by lending institution. Make sure that the minimum payment required pays the entire interest charges for the month. You want to avoid negative amortization — this is where the payment does not cover interest charges for the period and any unpaid interest is added to your borrowed amount.

Most lenders allow you to select the repayment term in months.

It may vary by your LTV position and the amount your borrow. Most terms range from 120-240 months (10-20 years).

There are a few exceptions where you can get longer terms.

Some lenders will allow you to choose the minimum repayment schedule. The two most common repayment schedules include:

• Interest only plus any penalty-related fees
  
  none of the minimum payment is used to reduce the principal
  
  
• Percentage of the balance plus interest and any penalty-related fees
  
  a small portion of the payment is used to reduce the principal — note however that the amount paid will not reduce your loan amount to zero when it is due
  

Check with your lending institution.

Some banks allow for multiple payment options that may include in person, by mail, by phone, by electronic device, or by ATM.

Some banks also offer rate reduction for automated draft. Check with the lending institution.

Generally the Average Daily Balance (including all new advances).

May vary by lending institution.

Some lenders may require an initial advance upon open your account to avoid paying closing costs.

This may vary by lending institution.

All home equity loans require an amount being advanced.

Some lenders may require a minimum amount to avoid paying closing costs.

This may vary by lending institution.

Varies by lender.

Some lenders do not impose any restrictions.

Other lenders may require you to borrow a minimum amount each time you draw on the line (for example, $300) and to keep a minimum amount outstanding.

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Your home equity line of credit can save you money since it is secured by a mortgage lien on your home. The interest charged to your equity account is considered mortgage interest and may be tax deductible for some taxpayers.*

See what your effective tax rate will be for each income level

* Tax savings are available for taxpayers who qualify to deduct mortgage-related interest from their taxes. See your tax advisor for more information.

Varies by lender.

Many lenders allow access to your account for up to 5-10 years with a renewable option.

If you choose not to renew, or if you fail to meet the renewal requirements, the line will close and the remaining balance will be due.

Some lenders will amortized your remaining balance over a fixed repayment period of 10-20 years. Again, this may vary by lender.

If the lender does not allow amortization at the end of the draw period, you will need to pay the balance due or face foreclosure on your home.

Varies by lender.

Typically, lenders will provide you special checks that can be used to "write yourself a loan", or in other words, access your account.

In addition, some lenders provide a credit/debit card access to your account.

Caution: although you are protected against fraudulent use of the cards, your home can be potentially exposed for a short period to unauthorized use if your card is stolen.

Some lenders may offer a lower APR rate if all payments are deducted automatically from a bank checking account.

*The proceeding features and terms may vary by lender. Check with your lender before finalizing your home equity decision.