A

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 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 that reflect the total cost of the loan (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 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 or during the life of the line of credit.

Closing costs - All expenses related to funding a home equity loan or home equity line of credit.

Conversion fee - The fee charged to convert a variable rate line of credit to a fixed-rate loan.

Credit history - A borrower’s record of debts and past payment history.

Credit score(s) - A statistical method that lenders use to quickly and objectively assess the credit risk of a loan applicant.

D

Draw period - The timeframe when you can withdraw money from a Home Equity Line of Credit.

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, 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.

I

Index - The base for rate changes that lenders use to calculate the rate on a loan (e.g. Prime, 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 for the privilege of borrowing money.

L

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 of your home.

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 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

R

Realtor - A member of the National Association of Realtors.

Refinance - Replacing an older loan with a newer one.

S

Sub-prime - A type of loan that is offered to individuals with poor credit.

T

Teaser rate - A special introductory rate on a loan, tied to a specified period of time, which is below current market rates to entice borrowers.

Transaction fee - A fee charged each time you draw on your credit line.

V

Variable rate - An interest rate that may change periodically, related to an index for the life of the loan.

W

Withdrawal - The act of taking money from a Home Equity Line of Credit.