Which of the following is NOT true about HELOCS? A. Borrowers have flexibility i

Question

Which of the following is NOT true about HELOCS?

A. Borrowers have flexibility in the amount of monthly payments made each month.

B. The money from the HELOC is distributed as a lump sum to the borrower.

C. HELOCs are a form of secured lending because the house is pledged as collateral.

D. HELOCs often have early termination or inactivity fees.

A. Borrowers have flexibility in the amount of monthly payments made each month.

B. The money from the HELOC is distributed as a lump sum to the borrower.

C. HELOCs are a form of secured lending because the house is pledged as collateral.

D. HELOCs often have early termination or inactivity fees.

Explanation / Answer

A. Borrowers have flexibility in the amount of monthly payments made each month.- TRUE Repayment can be made for Interest Only or Interest and Principal. A HELOC has a minimum monthly payment i.e interest. However, additional repayment of any amount can be made
      
B. The money from the HELOC is distributed as a lump sum to the borrower. - FALSE - A In HELOC the borrower is not advanced the entire sum up front, but uses a line of credit to borrow and the total amount cannot exceed the credit limit.
      
C. HELOCs are a form of secured lending because the house is pledged as collateral - TRUE - the collateral is the borrower's equity in his/her house (akin to a second mortgage)
      
D. HELOCs often have early termination or inactivity fees. - TRUE - So, Upto 60% companies have early termination fees

Related Questions

Navigate

• Browse (All)
• Browse W
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.