Home EquityCHOICE Line of Credit Glossary of Terms

Here's an alphabetical list of commonly used terms and phrases pertaining to Home EquityCHOICE® Lines of Credit and Home Equity Loans. If you need more information, we also offer a list of Frequently Asked Questions. 

Amortization
A series of payments over a specific period of time calculated to fully pay the amount plus interest by the end of the life of the loan.

Annual Percentage Rate (APR)
The cost of credit on a yearly basis expressed as a percentage.

Application Fee
Fees that are paid at the time of application that may include charges for a property appraisal and a credit report. 

Appraised Value
The value of your home based on current market conditions.

Cap
A limit on how much the variable-interest rate can increase during the left of the line of credit. 

Closing
The time and place at which all documents for your loan are signed, dated and notarized.

Closing Costs
Fees paid at closing that may include attorneys' fees, fees for preparing and filing a mortgage and for taxes, title search and insurance.

Credit Limit
The maximum amount that you can borrow under a home equity plan.

Debt-to-Income Ratio
An indicator of your ability to take on debt, this ratio is the relationship between your monthly income before taxes and the amount of your minimum monthly debt payments. 

Equity
The difference between the appraised value of your home and the outstanding mortgage balance(s).

Fixed Rate
An interest rate that does not change during the life of the loan.

Home Equity Line of Credit
A revolving line of credit secured by your home. 

Home Equity Installment Loan
An installment loan secured by your home. 

Index
The base for rate changes that a lender uses to decide how much the annual percentage rate will change over time, i.e., the Wall Street Journal Prime Rate.

Interest Rate
The periodic charge, expressed as a percentage, for use of credit.

Loan-to-Value (LTV) Ratio
The amount of the new loan or line of credit added to the balance of any existing liens and then divided by the market value of your home. 

Margin
The number of percentage points the lender adds to the Index to determine the annual percentage rate to be charged.

Minimum Payment
The minimum amount due (usually monthly) on your account. In some home equity plans, the minimum payment may be "interest only." In other plans, the minimum payment may include principal and interest. 

Security Interest
An interest that a lender takes in the borrower's property to ensure repayment of a debt, i.e., a mortgage.

Variable Rate
An interest rate that changes periodically in relation to an Index. Payments may increase or decrease when the index increases or decreases.

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