Access card
- A machine readable card that allows you to access your HELOC account.
Affordability calculator
- One of many calculators on the Internet which estimates how much loan a person can afford to borrow.
Amortization
- The process of regular repayments at scheduled intervals to reduce the principle and repay interest as it is due.
Annual percentage rate (APR)
- The cost of a loan expressed as a yearly rate, which includes the interest rate, points, broker fees, insurance, and any other related fees a borrower is required to pay.
Annual fee
- An annual charge imposed by the lender for maintaining a loan.
Application fee
- A fee charged by the lender to cover the cost of processing a loan request and checking the borrower's credit.
Appraisal fee
- The fee an appraiser charges to assess the value of a property.
B
Balloon
- A final lump sum loan payment due in full after a set period of time.
Borrower(s)
- A person who borrows money from a lender.
C
Cap
- A limit on how much the variable interest rate can increase annually, semi-annually, or during the life of the line of credit.
Closing costs
- Fees and expenses (separate and in addition to the purchase price of the property) incurred in the process of transferring ownership of property. May also be called settlement costs.
Conversion fee
- Points or an increased rate paid for converting an adjustable rate mortgage to a fixed rate mortgage.
Credit history
- A borrower's record of repaying loans and use of revolving credit. Used by lenders to assess applicant's creditworthiness.
Credit score(s)
- A statistical method that lenders use to quickly and objectively assess the credit risk of a loan applicant.
Draw period
- The timeframe when you can withdraw money from a home equity line of credit. After the draw period expires, the repayment period generally follows.
E
Equity
- The current market value of a property minus any outstanding loans or liens.
F
Fair Isaac Corporation (FICO)
- The company that developed the FICO credit score, which is used to judge a borrower's creditworthiness.
Fixed rate loan
- A fixed interest rate loan, or installment loan, that does not change or adjust during the course of the loan.
H
Home equity loan (HEL)
- A fixed rate loan secured by a primary residence or second home, to the property's fair market value.
Home equity line of credit (HELOC)
- A form of revolving credit in which your home serves as collateral.
I
>Index
- A published cost of money measurement that lenders use to calculate the rate on a mortgage (e.g., T-bill, LIBOR, CMT.)
Internet
- A global communication network that allows computers worldwide to connect and exchange information.
Interest-only
- A non-amortized loan where interest is due at regular intervals until maturity, at which point the full principle on the loan is due.
Interest rate
- A rate that is charged for the privilege of borrowing money.
L
Lender(s)
- A person or company which lends money to borrowers.
Loan-to-value (LTV) ratio
- The ratio of the fair market value of the home to the value of the loan that it is securing.
Loan officer
- The person at a lending institution who solicits loans, acts as the representative for the lending institution, and represents the borrower at the lending institution.
M
Margin
- The difference between the interest rate and the index on a loan.
Mortgage
- A lien on real estate to secure repayment of a loan.
Mortgage payment
- The monthly payment amount owed to a lender which covers the principal and interest on a property.
N
Negative equity
- When the current market value of a property is less than the amount owed.
P
Point(s)
- An upfront fee that a lender may charge a borrower for originating a loan. One point is equal to one percent of the loan amount.
Pre-payment penalty
- A fee paid to a lender for the privilege of paying off a loan prior to maturity.
Prime Rate
- A standardized short-term borrowing rate established by the Federal Reserve Board.
Principal and interest(P&I)
- The actual loan amount and interest paid back to the lender in the form of monthly payments.
R
Realtor
- A member of the National Association of Realtors.
Refinance
- Paying off an existing loan with the proceeds from a new one, usually of the same size and using the same property as collateral.
S
Sub-prime
- A class of loans that is offered to individuals with less-than-perfect credit.
Teaser rate
- A special introductory rate on a loan or line, usually tied to a specified period of time, which is below current market rates to entice borrowers.
Transaction fee
- The amount a borrower is charged for each withdrawal on a line of credit.
V
Variable rate
- An interest rate that may change periodically, and is usually based on an in index and a margin that is predetermined.
W
Withdrawal
- The act of drawing funds from a home equity line of credit, normally using special checks or access cards.
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