Equity Elite Home Equity Line Of Credit Application IMPORTANT INFORMATION ABOUT PROCEDURES FOR OPENING A NEW ACCOUNT To help the government fight the funding of terrorism and money laundering activities, Federal law under the Patriot Act requires all financial institutions to obtain, verify, and record information that identifies each person who opens an account. What this means for you: When you open an account, we will ask for your name, address, date of birth, and other information that will allow us to identify you. We may also ask to see your driver's license and other identifying documents. This is a list of our branches. Please select a branch location that you would like to close your application with. Main Office 2034 Wilma Rudolph Blvd Clarksville, TN. 37040 (931) 503-8282 Madison Street Office 1780 Madison Street Clarksville, TN. 37043 (931) 551-8055 Trenton Road Office 3863A Trenton Road Clarksville, TN. 37040 (931) 245-5100 Hilltop Market Office 400 HWY 149 Clarksville, TN. 37040 (931) 245-0153 Dover Road Office 260 Dover Road Clarksville, TN. 37042 931.245.3068 Important Terms of Our Home Equity Line of Credit This disclosure contains important information about our Home Equity Line of Credit. You should read it carefully and keep a copy for your records. Availability of Terms: All of the terms described below are subject to change. If any of these terms change (other than the annual percentage rate) and you decide, as a result, not to enter into an agreement with us, you are entitled to a refund of any fees that you have paid to us or anyone else in connection with your application. Security Interest: We will take a mortgage, deed of trust, or deed to secure debt on your home. You could lose your home if you do not meet the obligations in your agreement with us. Possible Actions: We can terminate your account, require you to pay us the entire outstanding balance in one payment, and charge you certain fees, or we can refuse to make additional extensions of credit or reduce your credit limit if: You engage in fraud or material misrepresentation in connection with the line. You do not meet the repayment terms of the account. Your action or inaction adversely affects the collateral or our rights in the collateral; including but not limited to: (1) you transfer title to the Real Property securing your account or sell the Real Property without our written consent; (2) you fail to maintain required insurance on the Real Property; (3) you commit waste or otherwise destructively use or fail to maintain the Real Property; (4) you fail to pay taxes on the Real Property or otherwise allow or cause a lien to be filed on the Real Property; (5) the death of the sole consumer obligated on the account; (6) the taking of the Real Property through eminent domain; or (7) foreclosure proceedings are instituted by a prior lienholder. We can refuse to make additional extensions of credit or reduce your credit limit if: The value of the dwelling securing the line declines significantly below its appraised value for purposes of the account. We reasonably believe you will not be able to meet the repayment requirements due to a material change in your financial circumstances. You are in default of a material obligation in the agreement. Government action prevents us from imposing the annual percentage rate provided for or impairs our security interest such that the value of the interest is less than 120 percent of the credit line. A government authority has notified us that continued advances would constitute an unsafe and unsound practice. The maximum annual percentage rate is reached. If you ask, we will give you more specific information concerning when we can take these actions. Minimum Payment Requirements: Draw Period: You can obtain advances for 5 years (the “draw” period). Payments will be due Monthly. Your payments will be: all accrued interest plus credit life insurance premiums (if any), plus any past due payments and amounts which exceed your credit limit. The minimum payment will not repay the principal that is outstanding on your account. Minimum Payment Example: Draw Period Only: If you made only the minimum payments and took no other credit advances, it would take 60 months to pay off a credit advance of $10,000.00 at an ANNUAL PERCENTAGE RATE of 7.00%. During that period, you would make 59 monthly payments varying between $58.33 and $58.33, and one final payment of $10,058.33. Fees and Charges: In order to open and maintain an account, you may be required to pay certain fees and charges. These fees generally total as follows: Appraiser: $150-$300.00, Flood Determination: $15-$17.00, State Recording Fees: $25-$300.00, Attorney Fees: $100-$300.00 In the event you are required to pay these fees, the Lender will provide you with an itemization of such fees. Property Insurance: You must carry insurance on the property that secures this account. Minimum Draw And Balance Requirements: The minimum credit advance that you can receive is $250.00. You must maintain an account balance of at least N/A . If you want to take advantage of our no closing cost offer, you will be required to take an initial advance. Tax Deductibility: You should consult a tax advisor regarding the deductibility of interest and charges for the account. Variable-Rate Feature: The account has a variable-rate feature, and the annual percentage rate (corresponding to the periodic rate) and the minimum monthly payment can change as a result. The annual percentage rate includes only interest and not other costs. The annual percentage rate is based on the value of an index. The index is New York Prime Rate and is published in the Wall Street Journal’s ‘‘Money Rates’’ table. To determine the ANNUAL PERCENTAGE RATE that will apply to your account, we add a margin to the value of the index. If checked ____ the initial ANNUAL PERCENTAGE RATE is discounted. It is not based on the index and margin used for later adjustments. The initial rate of N/A% will be in effect for NA. Ask us for the current index value, margin, discount and annual percentage rate. After you open an account, rate information will be provided on periodic monthly statements that we send to you. Rate Changes: The annual percentage rate can change daily. The maximum ANNUAL PERCENTAGE RATE that can apply while the account is open is 21% and the minimum ANNUAL PERCENTAGE RATE that can apply while the account is open is N/A %. Apart from this rate “cap” and rate “floor”, there is no limit on the amount by which the rate can change daily. Maximum Rate and Payment Example: If at the beginning of the draw period, the ANNUAL PERCENTAGE RATE equaled the 21% maximum rate and you had an outstanding balance of $10,000.00, the minimum monthly payment would be $175.00 Variable Rate Example: The following table shows how the annual percentage rate and the minimum monthly payments for a single $10,000 credit advance would have changed based on changes in the index over the past 15 years. The index values are from June 1st of each year. While only one payment amount per year is shown, payments would have varied during each year. The table assumes that no additional credit advances were taken, and that only the minimum payments were made each month. It does not necessarily indicate how the index or your payments would change in the future. Year Index Margin* Annual Percentage Rate Minimum Monthly Payment 1994 6.00 0.0 6.00 50.00 1995 8.50 0.0 8.50 50.00 1996 8.50 0.0 8.50 70.83 1997 8.25 0.0 8.25 70.83 1998 8.50 0.0 8.50 68.75 1999 7.75 0.0 7.75 N/A 2000 8.50 0.0 8.50 N/A 2001 9.50 0.0 9.50 N/A 2002 4.75 0.0 4.75 N/A 2003 4.25 0.0 4.25 N/A 2004 4.00 0.0 4.00 N/A 2005 5.25 0.0 5.25 N/A 2006 7.25 0.0 7.25 N/A 2007 8.25 0.0 8.25 N/A 2008 5.00 0.0 5.00 NA * This is a margin we have used recently. When Your Home is on the Line: What You Should Know About Home Equity Lines of Credit More and more lenders are offering home equity lines of credit. By using the equity in your home, you may qualify for a sizable amount of credit, available for use when and how you please, at an interest rate that is relatively low. Furthermore, under the tax law--depending on your specific situation--you may be allowed to deduct the interest because the debt is secured by your home. If you are in the market for credit, a home equity plan may be right for you. Or perhaps another form of credit would be better. Before making a decision, you should weigh carefully the costs of a home equity line against the benefits. Shop for the credit terms that best meet your borrowing needs without posing undue financial risk. And remember, failure to repay the amounts you've borrowed, plus interest, could mean the loss of your home. What is a home equity line of credit? A home equity line of credit is a form of revolving credit in which your home serves as collateral. Because the home is likely to be a consumer's largest asset, many homeowners use their credit lines only for major items such as education, home improvements, or medical bills and not for day-to-day expenses. With a home equity line, you will be approved for a specific amount of credit--your credit limit, the maximum amount you may borrow at any one time under the plan. Many lenders set the credit limit on a home equity line by taking a percentage (say, 75 percent) of the home's appraised value and subtracting from that the balance owed on the existing mortgage. For example, Appraised value of home $100,000 Percentage x 75% Percentage of appraised value = $ 75,000 Less balance owed on mortgage - $ 40,000 Potential Credit $ 35,000 In determining your actual credit limit, the lender will also consider your ability to repay, by looking at your income, debts, and other financial obligations as well as your credit history. Many home equity plans set a fixed period during which you can borrow money, such as 10 years. At the end of this "draw period," you may be allowed to renew the credit line. If your plan does not allow renewals, you will not be able to borrow additional money once the period has ended. Some plans may call for payment in full of any outstanding balance at the end of the period. Others may allow repayment over a fixed period (the "repayment period"), for example, 10 years. Once approved for a home equity line of credit, you will most likely be able to borrow up to your credit limit whenever you want. Typically, you will use special checks to draw on your line. Under some plans, borrowers can use a credit card or other means to draw on the line. There may be limitations on how you use the line. Some plans may require you to borrow a minimum amount each time you draw on the line (for example, $300) and to keep a minimum amount outstanding. Some plans may also require that you take an initial advance when the line is set up. What should you look for when shopping for a plan? If you decide to apply for a home equity line of credit, look for the plan that best meets your particular needs. Read the credit agreement carefully, and examine the terms and conditions of various plans, including the annual percentage rate (APR) and the costs of establishing the plan. The APR for a home equity line is based on the interest rate alone and will not reflect the closing costs and other fees and charges, so you'll need to compare these costs, as well as the APRs, among lenders. Interest rate charges and related plan features Home equity lines of credit typically involve variable rather than fixed interest rates. The variable rate must be based on a publicly available index (such as the prime rate published in some major daily newspapers or a U.S. Treasury bill rate); the interest rate for borrowing under the home equity line changes, mirroring fluctuations in the value of the index. Most lenders cite the interest rate you will pay as the value of the index at a particular time plus a "margin," such as 2 percentage points. Because the cost of borrowing is tied directly to the value of the index, it is important to find out which index is used, how often the value of the index changes, and how high it has risen in the past as well as the amount of the margin. Lenders sometimes offer a temporarily discounted interest rate for home equity lines--a rate that is unusually low and may last for only an introductory period, such as 6 months. Variable-rate plans secured by a dwelling must, by law, have a ceiling (or cap) on how much your interest rate may increase over the life of the plan. Some variable-rate plans limit how much your payment may increase and how low your interest rate may fall if interest rates drop. Some lenders allow you to convert from a variable interest rate to a fixed rate during the life of the plan, or to convert all or a portion of your line to a fixed-term installment loan. Plans generally permit the lender to freeze or reduce your credit line under certain circumstances. For example, some variable-rate plans may not allow you to draw additional funds during a period in which the interest rate reaches the cap. Costs of establishing and maintaining a home equity line Many of the costs of setting up a home equity line of credit are similar to those you pay when you buy a home. For example: A fee for a property appraisal to estimate the value of your home. An application fee, which may not be refunded if you are turned down for credit. Up-front charges, such as one or more points (one point equals 1 percent of the credit limit). Closing costs, including fees for attorneys, title search, and mortgage preparation and filing; property and title insurance; and taxes. In addition, you may be subject to certain fees during the plan period, such as annual membership or maintenance fees and a transaction fee every time you draw on the credit line. You could find yourself paying hundreds of dollars to establish the plan. If you were to draw only a small amount against your credit line, those initial charges would substantially increase the cost of the funds borrowed. On the other hand, because the lender's risk is lower than for other forms of credit, as your home serves as collateral, annual percentage rates for home equity lines are generally lower than rates for other types of credit. The interest you save could offset the costs of establishing and maintaining the line. Moreover, some lenders waive some or all of the closing costs. How will you repay your home equity plan? Before entering into a plan, consider how you will pay back the money you borrow. Some plans set minimum payments that cover a portion of the principal (the amount you borrow) plus accrued interest. But (unlike with the typical installment loan) the portion that goes toward principal may not be enough to repay the principal by the end of the term. Other plans may allow payment of interest alone during the life of the plan, which means that you pay nothing toward the principal. If you borrow $10,000, you will owe that amount when the plan ends. Regardless of the minimum required payment, you may choose to pay more, and many lenders offer a choice of payment options. Many consumers choose to pay down the principal regularly as they do with other loans. For example, if you use your line to buy a boat, you may want to pay it off as you would a typical boat loan. Whatever your payment arrangements during the life of the plan--whether you pay some, a little, or none of the principal amount of the loan--when the plan ends you may have to pay the entire balance owed, all at once. You must be prepared to make this "balloon payment" by refinancing it with the lender, by obtaining a loan from another lender, or by some other means. If you are unable to make the balloon payment, you could lose your home. If your plan has a variable interest rate, your monthly payments may change. Assume, for example, that you borrow $10,000 under a plan that calls for interest-only payments. At a 10 percent interest rate, your monthly payments would be $83. If the rate rises over time to 15 percent, your monthly payments will increase to $125. Similarly, if you are making payments that cover interest plus some portion of the principal, your monthly payments may increase, unless your agreement calls for keeping payments the same throughout the plan period. If you sell your home, you will probably be required to pay off your home equity line in full immediately. If you are likely to sell your home in the near future, consider whether it makes sense to pay the up-front costs of setting up a line of credit. Also keep in mind that renting your home may be prohibited under the terms of your agreement. Lines of credit vs. traditional second mortgage loans If you are thinking about a home equity line of credit, you might also want to consider a traditional second mortgage loan. A second mortgage provides you with a fixed amount of money repayable over a fixed period. In most cases the payment schedule calls for equal payments that will pay off the entire loan within the loan period. You might consider a second mortgage instead of a home equity line if, for example, you need a set amount for a specific purpose, such as an addition to your home. In deciding which type of loan best suits your needs, consider the costs under the two alternatives. Look at both the APR and other charges. Do not, however, simply compare the APRs, because the APRs on the two types of loans are figured differently: The APR for a traditional second mortgage loan takes into account the interest rate charged plus points and other finance charges. The APR for a home equity line of credit is based on the periodic interest rate alone. It does not include points or other charges. Disclosures from lenders The federal Truth in Lending Act requires lenders to disclose the important terms and costs of their home equity plans, including the APR, miscellaneous charges, the payment terms, and information about any variable-rate feature. And in general, neither the lender nor anyone else may charge a fee until after you have received this information. You usually get these disclosures when you receive an application form, and you will get additional disclosures before the plan is opened. If any term (other than a variable-rate feature) changes before the plan is opened, the lender must return all fees if you decide not enter into the plan because of the change. When you open a home equity line, the transaction puts your home at risk. If the home involved is your principal dwelling, the Truth in Lending Act gives you 3 days from the day the account was opened to cancel the credit line. This right allows you to change your mind for any reason. You simply inform the lender in writing within the 3-day period. The lender must then cancel its secuity interest in your home and return all fees--including any application and appraisal fees-- paid to open the account. 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. Where to Go for Help The following federal agencies are responsible for enforcing the federal Truth in Lending Act, the law that governs credit term disclosure for home equity lines. Any questions concerning compliance with the act by a particular financial institution should be directed to its enforcement agency. State Member Banks of the Federal Reserve System Division of Consumer and Community Affairs Board of Governors of the Federal Reserve System 20th and C Streets, N.W., Stop 801 Washington DC 20551 (202) 452-3693 www.federalreserve.gov National Banks Consumer Activities Unit Office of the Comptroller of the Currency 1301 McKinney St. Suite 3710 Houston, TX 77010 (800) 613-6743 www.occ.treas.gov Federal Credit Unions National Credit Union Administration Office of Public and Congressional Affairs 1775 Duke St. Alexandria, VA 22314-3428 (703) 518-6330 www.ncua.gov Federally Insured Non-Member State-Chartered Banks and Savings BanksCompliance and Consumer Affairs Federal Deposit Insurance Corporation 2345 Grand Boulevard, Suite 100 Kansas City, MO 64108 (877)275-3342 www.fdic.gov Federally Insured Savings and Loan Institutions and Federally Chartered Savings Banks Office of Thrift Supervision Consumer Programs 1700 G Street, NW, 6thFloor Washington, DC 20552 (202) 906-6237 or (800) 842-6929 www.ots.treas.gov Mortgage Companies and Other Lenders Consumer Response Center Federal Trade Commission 601 Pennsylvania Avenue, NW Washington, DC 20580 (202) 326-3758 or (877) 382-4357 www.ftc.gov * By checking , I/We acknowledge receipt of this disclosure as well as the entitled “When Your Home Is On The Line; What You Should Know About Home Equity Lines Of Credit.” I/ We have read and agree to all disclosures, terms, and conditions. Loan Request Information * Loan Amount Desired: $ * Estimated Home Value: $ * Purchase Date: $ * Purchase Price: $ * Improvements Cost: $ * Improvements Year: $ * Current Market Value of Collateral: $ * Required Applicant Information * First Name: $ Middle Name: $ * Last Name: $ * Address: $ * City: $ * State: $ * Zip: $ * Years There: $ * Home Phone: $ Email: $ * Social Security Number: $ * Birth Date: $ * Drivers License Number: $ * Drivers License State: $ * Required Applicant Employment Information * Current Employer: $ * Employer's Street Address: $ * Employer's City: $ * Employer's State: $ * Employer's Zip: $ * Time with Employer: $ * Employer's Phone: $ * Position: $ * Gross Monthly Income: $ Other Monthly Income: $ Other Monthly Income Source: $ Alimony, child support, or separate maintenance income need not be revealed, if you do not wish to have it considered as a basis for repaying this obligation. Are you a US Citizen? Yes No Do you Own or Rent your home? RentOwn Amount of Monthly housing payment: * Required Co-Applicant Information First Name: $ Middle Name: $ Last Name: $ Address: $ City: $ State: $ Zip: $ Years There: $ Home Phone: $ Email: $ Social Security Number: $ Birth Date: $ Drivers License Number: $ Drivers License State: $ Co-Applicant Employment Information Current Employer: $ Employer's Street Address: $ Employer's City: $ Employer's State: $ Employer's Zip: $ Time with Employer: $ Employer's Phone: $ Position: $ Gross Monthly Income: $ Other Monthly Income: $ Other Monthly Income Source: $ Alimony, child support, or separate maintenance income need not be revealed, if you do not wish to have it considered as a basis for repaying this obligation. Are you a US Citizen? Yes No Loan Purpose * Please select what the loan proceeds will be used for. Home Purchase Home Improvement or Home Refinance None The following information is requested by the Federal Government for certain types of loans related to a dwelling in order to monitor the lender’s compliance with equal credit opportunity, fair housing, and home mortgage disclosure laws. You are not required to furnish this information, but are encouraged to do so. You may select one of more designations for “Race”. The law provides that a lender may not discriminate on the basis of this information, or on whether you choose to furnish it. Primary Applicant HMDA Information I have read the disclosure and agree. I do not wish to furnish this information. Sex: Female Male Ethnicity: Hispanic or Latino Not Hispanic or Latino Race: American Indian or Alaska Native Asian Black or African American Native Hawaiian or other Pacific Islander White Joint Applicant HMDA Information I have read the disclosure and agree. I do not wish to furnish this information. Sex: Female Male Ethnicity: Hispanic or Latino Not Hispanic or Latino Race: American Indian or Alaska Native Asian Black or African American Native Hawaiian or other Pacific Islander White * If none, please indicate loan purpose Property Information * Property Address: $ * Property City: $ * Property State: $ * Property Zip: $
Equity Elite Home Equity Line Of Credit Application
IMPORTANT INFORMATION ABOUT PROCEDURES FOR OPENING A NEW ACCOUNT To help the government fight the funding of terrorism and money laundering activities, Federal law under the Patriot Act requires all financial institutions to obtain, verify, and record information that identifies each person who opens an account. What this means for you: When you open an account, we will ask for your name, address, date of birth, and other information that will allow us to identify you. We may also ask to see your driver's license and other identifying documents.
This is a list of our branches. Please select a branch location that you would like to close your application with.
Important Terms of Our Home Equity Line of Credit
This disclosure contains important information about our Home Equity Line of Credit. You should read it carefully and keep a copy for your records.
Availability of Terms: All of the terms described below are subject to change. If any of these terms change (other than the annual percentage rate) and you decide, as a result, not to enter into an agreement with us, you are entitled to a refund of any fees that you have paid to us or anyone else in connection with your application.
Security Interest: We will take a mortgage, deed of trust, or deed to secure debt on your home. You could lose your home if you do not meet the obligations in your agreement with us.
Possible Actions:
We can terminate your account, require you to pay us the entire outstanding balance in one payment, and charge you certain fees, or we can refuse to make additional extensions of credit or reduce your credit limit if:
You engage in fraud or material misrepresentation in connection with the line.
You do not meet the repayment terms of the account.
Your action or inaction adversely affects the collateral or our rights in the collateral; including but not limited to: (1) you transfer title to the Real Property securing your account or sell the Real Property without our written consent; (2) you fail to maintain required insurance on the Real Property; (3) you commit waste or otherwise destructively use or fail to maintain the Real Property; (4) you fail to pay taxes on the Real Property or otherwise allow or cause a lien to be filed on the Real Property; (5) the death of the sole consumer obligated on the account; (6) the taking of the Real Property through eminent domain; or (7) foreclosure proceedings are instituted by a prior lienholder.
We can refuse to make additional extensions of credit or reduce your credit limit if:
The value of the dwelling securing the line declines significantly below its appraised value for purposes of the account.
We reasonably believe you will not be able to meet the repayment requirements due to a material change in your financial circumstances.
You are in default of a material obligation in the agreement.
Government action prevents us from imposing the annual percentage rate provided for or impairs our security interest such that the value of the interest is less than 120 percent of the credit line.
A government authority has notified us that continued advances would constitute an unsafe and unsound practice.
The maximum annual percentage rate is reached.
If you ask, we will give you more specific information concerning when we can take these actions.
Minimum Payment Requirements:
Draw Period: You can obtain advances for 5 years (the “draw” period). Payments will be due Monthly. Your payments will be: all accrued interest plus credit life insurance premiums (if any), plus any past due payments and amounts which exceed your credit limit. The minimum payment will not repay the principal that is outstanding on your account.
Minimum Payment Example:
Draw Period Only: If you made only the minimum payments and took no other credit advances, it would take 60 months to pay off a credit advance of $10,000.00 at an ANNUAL PERCENTAGE RATE of 7.00%. During that period, you would make 59 monthly payments varying between $58.33 and $58.33, and one final payment of $10,058.33.
Fees and Charges: In order to open and maintain an account, you may be required to pay certain fees and charges. These fees generally total as follows: Appraiser: $150-$300.00, Flood Determination: $15-$17.00, State Recording Fees: $25-$300.00, Attorney Fees: $100-$300.00 In the event you are required to pay these fees, the Lender will provide you with an itemization of such fees.
Property Insurance: You must carry insurance on the property that secures this account.
Minimum Draw And Balance Requirements: The minimum credit advance that you can receive is $250.00. You must maintain an account balance of at least N/A . If you want to take advantage of our no closing cost offer, you will be required to take an initial advance.
Tax Deductibility: You should consult a tax advisor regarding the deductibility of interest and charges for the account.
Variable-Rate Feature: The account has a variable-rate feature, and the annual percentage rate (corresponding to the periodic rate) and the minimum monthly payment can change as a result. The annual percentage rate includes only interest and not other costs. The annual percentage rate is based on the value of an index. The index is New York Prime Rate and is published in the Wall Street Journal’s ‘‘Money Rates’’ table. To determine the ANNUAL PERCENTAGE RATE that will apply to your account, we add a margin to the value of the index. If checked ____ the initial ANNUAL PERCENTAGE RATE is discounted. It is not based on the index and margin used for later adjustments. The initial rate of N/A% will be in effect for NA. Ask us for the current index value, margin, discount and annual percentage rate. After you open an account, rate information will be provided on periodic monthly statements that we send to you.
Rate Changes: The annual percentage rate can change daily. The maximum ANNUAL PERCENTAGE RATE that can apply while the account is open is 21% and the minimum ANNUAL PERCENTAGE RATE that can apply while the account is open is N/A %. Apart from this rate “cap” and rate “floor”, there is no limit on the amount by which the rate can change daily.
Maximum Rate and Payment Example: If at the beginning of the draw period, the ANNUAL PERCENTAGE RATE equaled the 21% maximum rate and you had an outstanding balance of $10,000.00, the minimum monthly payment would be $175.00
Variable Rate Example: The following table shows how the annual percentage rate and the minimum monthly payments for a single $10,000 credit advance would have changed based on changes in the index over the past 15 years. The index values are from June 1st of each year. While only one payment amount per year is shown, payments would have varied during each year.
The table assumes that no additional credit advances were taken, and that only the minimum payments were made each month. It does not necessarily indicate how the index or your payments would change in the future.
1994
6.00
0.0
50.00
1995
8.50
1996
70.83
1997
8.25
1998
68.75
1999
7.75
N/A
2000
2001
9.50
2002
4.75
2003
4.25
2004
4.00
2005
5.25
2006
7.25
2007
2008
5.00
NA
* This is a margin we have used recently.
When Your Home is on the Line: What You Should Know About Home Equity Lines of Credit
More and more lenders are offering home equity lines of credit. By using the equity in your home, you may qualify for a sizable amount of credit, available for use when and how you please, at an interest rate that is relatively low. Furthermore, under the tax law--depending on your specific situation--you may be allowed to deduct the interest because the debt is secured by your home.
If you are in the market for credit, a home equity plan may be right for you. Or perhaps another form of credit would be better. Before making a decision, you should weigh carefully the costs of a home equity line against the benefits. Shop for the credit terms that best meet your borrowing needs without posing undue financial risk. And remember, failure to repay the amounts you've borrowed, plus interest, could mean the loss of your home.
What is a home equity line of credit? A home equity line of credit is a form of revolving credit in which your home serves as collateral. Because the home is likely to be a consumer's largest asset, many homeowners use their credit lines only for major items such as education, home improvements, or medical bills and not for day-to-day expenses.
With a home equity line, you will be approved for a specific amount of credit--your credit limit, the maximum amount you may borrow at any one time under the plan. Many lenders set the credit limit on a home equity line by taking a percentage (say, 75 percent) of the home's appraised value and subtracting from that the balance owed on the existing mortgage. For example,
In determining your actual credit limit, the lender will also consider your ability to repay, by looking at your income, debts, and other financial obligations as well as your credit history. Many home equity plans set a fixed period during which you can borrow money, such as 10 years. At the end of this "draw period," you may be allowed to renew the credit line. If your plan does not allow renewals, you will not be able to borrow additional money once the period has ended. Some plans may call for payment in full of any outstanding balance at the end of the period. Others may allow repayment over a fixed period (the "repayment period"), for example, 10 years.
Once approved for a home equity line of credit, you will most likely be able to borrow up to your credit limit whenever you want. Typically, you will use special checks to draw on your line. Under some plans, borrowers can use a credit card or other means to draw on the line. There may be limitations on how you use the line. Some plans may require you to borrow a minimum amount each time you draw on the line (for example, $300) and to keep a minimum amount outstanding. Some plans may also require that you take an initial advance when the line is set up.
What should you look for when shopping for a plan? If you decide to apply for a home equity line of credit, look for the plan that best meets your particular needs. Read the credit agreement carefully, and examine the terms and conditions of various plans, including the annual percentage rate (APR) and the costs of establishing the plan. The APR for a home equity line is based on the interest rate alone and will not reflect the closing costs and other fees and charges, so you'll need to compare these costs, as well as the APRs, among lenders.
Interest rate charges and related plan features Home equity lines of credit typically involve variable rather than fixed interest rates. The variable rate must be based on a publicly available index (such as the prime rate published in some major daily newspapers or a U.S. Treasury bill rate); the interest rate for borrowing under the home equity line changes, mirroring fluctuations in the value of the index. Most lenders cite the interest rate you will pay as the value of the index at a particular time plus a "margin," such as 2 percentage points. Because the cost of borrowing is tied directly to the value of the index, it is important to find out which index is used, how often the value of the index changes, and how high it has risen in the past as well as the amount of the margin.
Lenders sometimes offer a temporarily discounted interest rate for home equity lines--a rate that is unusually low and may last for only an introductory period, such as 6 months.
Variable-rate plans secured by a dwelling must, by law, have a ceiling (or cap) on how much your interest rate may increase over the life of the plan. Some variable-rate plans limit how much your payment may increase and how low your interest rate may fall if interest rates drop.
Some lenders allow you to convert from a variable interest rate to a fixed rate during the life of the plan, or to convert all or a portion of your line to a fixed-term installment loan.
Plans generally permit the lender to freeze or reduce your credit line under certain circumstances. For example, some variable-rate plans may not allow you to draw additional funds during a period in which the interest rate reaches the cap.
Costs of establishing and maintaining a home equity line Many of the costs of setting up a home equity line of credit are similar to those you pay when you buy a home.
For example: A fee for a property appraisal to estimate the value of your home. An application fee, which may not be refunded if you are turned down for credit. Up-front charges, such as one or more points (one point equals 1 percent of the credit limit). Closing costs, including fees for attorneys, title search, and mortgage preparation and filing; property and title insurance; and taxes.
In addition, you may be subject to certain fees during the plan period, such as annual membership or maintenance fees and a transaction fee every time you draw on the credit line. You could find yourself paying hundreds of dollars to establish the plan. If you were to draw only a small amount against your credit line, those initial charges would substantially increase the cost of the funds borrowed. On the other hand, because the lender's risk is lower than for other forms of credit, as your home serves as collateral, annual percentage rates for home equity lines are generally lower than rates for other types of credit. The interest you save could offset the costs of establishing and maintaining the line. Moreover, some lenders waive some or all of the closing costs.
How will you repay your home equity plan? Before entering into a plan, consider how you will pay back the money you borrow. Some plans set minimum payments that cover a portion of the principal (the amount you borrow) plus accrued interest. But (unlike with the typical installment loan) the portion that goes toward principal may not be enough to repay the principal by the end of the term. Other plans may allow payment of interest alone during the life of the plan, which means that you pay nothing toward the principal. If you borrow $10,000, you will owe that amount when the plan ends.
Regardless of the minimum required payment, you may choose to pay more, and many lenders offer a choice of payment options. Many consumers choose to pay down the principal regularly as they do with other loans. For example, if you use your line to buy a boat, you may want to pay it off as you would a typical boat loan.
Whatever your payment arrangements during the life of the plan--whether you pay some, a little, or none of the principal amount of the loan--when the plan ends you may have to pay the entire balance owed, all at once. You must be prepared to make this "balloon payment" by refinancing it with the lender, by obtaining a loan from another lender, or by some other means. If you are unable to make the balloon payment, you could lose your home.
If your plan has a variable interest rate, your monthly payments may change. Assume, for example, that you borrow $10,000 under a plan that calls for interest-only payments. At a 10 percent interest rate, your monthly payments would be $83. If the rate rises over time to 15 percent, your monthly payments will increase to $125. Similarly, if you are making payments that cover interest plus some portion of the principal, your monthly payments may increase, unless your agreement calls for keeping payments the same throughout the plan period. If you sell your home, you will probably be required to pay off your home equity line in full immediately. If you are likely to sell your home in the near future, consider whether it makes sense to pay the up-front costs of setting up a line of credit. Also keep in mind that renting your home may be prohibited under the terms of your agreement.
Lines of credit vs. traditional second mortgage loans If you are thinking about a home equity line of credit, you might also want to consider a traditional second mortgage loan. A second mortgage provides you with a fixed amount of money repayable over a fixed period. In most cases the payment schedule calls for equal payments that will pay off the entire loan within the loan period. You might consider a second mortgage instead of a home equity line if, for example, you need a set amount for a specific purpose, such as an addition to your home.
In deciding which type of loan best suits your needs, consider the costs under the two alternatives. Look at both the APR and other charges. Do not, however, simply compare the APRs, because the APRs on the two types of loans are figured differently:
The APR for a traditional second mortgage loan takes into account the interest rate charged plus points and other finance charges.
The APR for a home equity line of credit is based on the periodic interest rate alone. It does not include points or other charges.
Disclosures from lenders The federal Truth in Lending Act requires lenders to disclose the important terms and costs of their home equity plans, including the APR, miscellaneous charges, the payment terms, and information about any variable-rate feature. And in general, neither the lender nor anyone else may charge a fee until after you have received this information. You usually get these disclosures when you receive an application form, and you will get additional disclosures before the plan is opened. If any term (other than a variable-rate feature) changes before the plan is opened, the lender must return all fees if you decide not enter into the plan because of the change. When you open a home equity line, the transaction puts your home at risk. If the home involved is your principal dwelling, the Truth in Lending Act gives you 3 days from the day the account was opened to cancel the credit line. This right allows you to change your mind for any reason. You simply inform the lender in writing within the 3-day period. The lender must then cancel its secuity interest in your home and return all fees--including any application and appraisal fees-- paid to open the account.
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.
Where to Go for Help The following federal agencies are responsible for enforcing the federal Truth in Lending Act, the law that governs credit term disclosure for home equity lines. Any questions concerning compliance with the act by a particular financial institution should be directed to its enforcement agency.
State Member Banks of the Federal Reserve System Division of Consumer and Community Affairs Board of Governors of the Federal Reserve System 20th and C Streets, N.W., Stop 801 Washington DC 20551 (202) 452-3693 www.federalreserve.gov National Banks Consumer Activities Unit Office of the Comptroller of the Currency 1301 McKinney St. Suite 3710 Houston, TX 77010 (800) 613-6743 www.occ.treas.gov Federal Credit Unions National Credit Union Administration Office of Public and Congressional Affairs 1775 Duke St. Alexandria, VA 22314-3428 (703) 518-6330 www.ncua.gov Federally Insured Non-Member State-Chartered Banks and Savings BanksCompliance and Consumer Affairs Federal Deposit Insurance Corporation 2345 Grand Boulevard, Suite 100 Kansas City, MO 64108 (877)275-3342 www.fdic.gov Federally Insured Savings and Loan Institutions and Federally Chartered Savings Banks Office of Thrift Supervision Consumer Programs 1700 G Street, NW, 6thFloor Washington, DC 20552 (202) 906-6237 or (800) 842-6929 www.ots.treas.gov Mortgage Companies and Other Lenders Consumer Response Center Federal Trade Commission 601 Pennsylvania Avenue, NW Washington, DC 20580 (202) 326-3758 or (877) 382-4357 www.ftc.gov
State Member Banks of the Federal Reserve System Division of Consumer and Community Affairs Board of Governors of the Federal Reserve System 20th and C Streets, N.W., Stop 801 Washington DC 20551 (202) 452-3693 www.federalreserve.gov
National Banks Consumer Activities Unit Office of the Comptroller of the Currency 1301 McKinney St. Suite 3710 Houston, TX 77010 (800) 613-6743 www.occ.treas.gov
Federal Credit Unions National Credit Union Administration Office of Public and Congressional Affairs 1775 Duke St. Alexandria, VA 22314-3428 (703) 518-6330 www.ncua.gov
Federally Insured Non-Member State-Chartered Banks and Savings BanksCompliance and Consumer Affairs Federal Deposit Insurance Corporation 2345 Grand Boulevard, Suite 100 Kansas City, MO 64108 (877)275-3342 www.fdic.gov
Federally Insured Savings and Loan Institutions and Federally Chartered Savings Banks Office of Thrift Supervision Consumer Programs 1700 G Street, NW, 6thFloor Washington, DC 20552 (202) 906-6237 or (800) 842-6929 www.ots.treas.gov
Mortgage Companies and Other Lenders Consumer Response Center Federal Trade Commission 601 Pennsylvania Avenue, NW Washington, DC 20580 (202) 326-3758 or (877) 382-4357 www.ftc.gov
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