A margin or markup is then added to the index to arrive at the adjusted rate. Unlike traditional second mortgages, where the entire loan amount is given in one lump sum, approved homeowners are given access to a revolving line of credit which may be drawn upon by check, or in some cases, a credit card. Interest is paid only on the borrowed funds. Return to Top Loan Description Variations among home equity credit lines allow you to choose the product which best fits your needs. On the following pages is a clear description of the terms of these loans, and the choices available to borrowers.
Some lenders offer the loan to owners of cooperatives, with certain restrictions.
Also, some lenders do not require that the home be owner-occupied to qualify. The index is the economic indicator for the loan and may increase or decrease reflecting market conditions. While most home equity credit lines use the prime rate as the index, three month treasury bills or other indexes may be used by a lender. The prime rate is the rate major lending institutions offer their most creditworthy clients. The prime rate is listed in a variety of publications, e.g., The Wall Street Journal, The New York Times, and the Federal Reserve Statistical Release.