Glossary of Home Equity Terms
- Access Card
- A plastic card you use to access the money in your account, in this case your HELOC.
- Affordability calculator
- One of many calculators on the Internet which estimates how much loan a person can afford to borrow.
- Amortization
- A timetable for the gradual repayment of a money borrowed.
- Annual Percentage Rate (APR)
- The Annual Percentage Rate refers to the actual cost of a loan including the rate, points, insurance, and any other related fees (not including credit reports or appraisal charges.)
- Annual fee
- An annual charge imposed by the lender for maintaining a loan.
- Application fee
- A fee charged by the lender to cover the origination cost, or any upfront fees, of the loan.
- Appraisal fee
- The fee an appraiser charges to assess the property value of a property. Back to top
- Balloon
- A final lump sum mortgage payment due in full after a set period of time.
- Borrower(s)
- A person who borrows money from a lender. Back to top
- Cap
- A limit on how much the variable interest rate can increase annually or during the life of the line of credit.
- Closing cost(s)
- All expenses related to funding a home equity loan or home equity line of credit.
- Conversion fee
- The fee charged to convert an adjustable rate mortgage to a fixed-rate loan.
- Credit history
- A borrower's record of past payment history.
- Credit score(s)
- A statistical method that lenders use to quickly and objectively assess the credit risk of a loan applicant. Back to top
- Draw Period
- The timeframe when you can withdraw money from a Home Equity Line of Credit. Back to top
- Equity
- The current market value of a property minus any outstanding loans or liens. Back to top
- 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. Back to top
- Home Equity Loan (HEL)
- A fixed rate loan, or installment loan, in which your home serves as collateral.
- Home Equity Line of Credit (HELOC)
- A form of revolving credit in which your home serves as collateral. Back to top
- 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
- The monthly payment amount owed to a lender which covers the interest-only portion of the amount borrowed. Your equity does not increase with this type of loan since you are not paying down the principal.
- Interest rate
- A rate that is charged or paid for the exchange to borrow money. Back to top
- Lender(s)
- A person or company which lends money to borrowers.
- Loan-to-value (LTV) ratio
- The amount of a mortgage loan divided by the appraised value or sales price.
- 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. Back to top
- 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. Back to top
- Negative Equity
- When the current market value of a property is less than the amount owed. Back to top
- 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 penalty for paying a loan early before its due date.
- Prime Rate
- The rate of interest publicly announced periodically by a lender. It is based on various factors, including banks' costs and desired return, and is it used as a reference point for pricing some loans.
- Principal and interest (P & I)
- The amount of a home equity loan payment including the principal and the interest Back to top
- Realtor
- A member of the National Association of Realtors.
- Refinance
- Replacing an older loan with a newer one. Back to top
- Sub-prime
- A type of mortgage loan that is offered to individuals with poor credit. Back to top
- Teaser rate
- A special introductory rate on an adjustable rate mortgage which is below current market rates to entice borrowers.
- Transaction fee
- A fee charged each time you draw on your credit line. Back to top
- Variable rate
- An interest rate that may change periodically, related to an index for the life of the loan. Back to top
- Withdrawal
- The act of taking money from a Home Equity Line of Credit. Back to top
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GLOSSARY
Home Equity Terms
