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Glossary
Annual
membership or maintenance fee An annual charge for having the
line of credit available. Charged regardless of whether or not the line is
used.
Annual
percentage rate (APR) The cost of credit on a yearly basis
expressed as a percentage.
Application
fee Fees that are paid upon application. May include charges
for property appraisal and a credit report.
Balloon
payment A lump-sum payment that may be required when the plan
ends.
Cap A
limit on how much the variable interest rate may increase during the life
of the plan.
Closing
costs Fees paid at closing, including attorneys fees, fees for
preparing and filing a mortgage, fees for title search, taxes, and
insurance.
Credit
limit The maximum amount that may be borrowed under the home
equity plan.
Equity
The difference between the fair market value (appraised valued) of the
home and the outstanding mortgage balance.
Index
Published rate that serves as a base for the interest rate charged on a
home equity line and also as the base for rate changes used by the
lender.
Interest
rate The periodic charge, expressed as a percentage, for use of
credit.
Margin
The number of percentage points the lender adds to the index rate to
determine the annual percentage rate.
Minimum
payment The minimum amount that you must pay (usually monthly)
on your account. Under some plans, the minimum payment may cover interest
only; under others, it may include both principal and interest.
Points
One point is equal to 1 percent of the amount of the credit line. Points
must usually be paid at closing and are in addition to monthly interest.
Security
interest An interest that a lender takes in the borrower's
property to ensure 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.
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