What You Should Know About Home Equity Lines of Credit
Retention of information: This disclosure contains the important information about your 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 these terms change (other than the annual percentage rate) and you decide not to enter into an agreement with us, you are entitled to a refund of any fees you paid to us or anyone else in connection with your application.
Security Interest: We will take a mortgage 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 line and require you to pay us the entire outstanding balance in one payment if:
You engage in fraud or material misrepresentation in connection with the line.
You do not meet the repayment terms.
Your action or inaction adversely affects the collateral or our rights in the collateral.
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 line.
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 the priority of our security interest such that the value of the interest is less than 120 percent of the credit line.
The maximum annual percentage rate is reached.
The initial Agreement permits us to make changes to the terms of the Agreement at specified times or upon the occurrence specified events.
A regulatory agency has notified us that continued advances would constitute an unsafe and unsound practice.
Minimum Payment Requirements: You can obtain advances of credit (the "draw period") for 120 months. During the draw period, payments will be due monthly. Your minimum monthly payment will equal 1/(360)th the outstanding balance plus the finance charges that have accrued on the remaining balance. The minimum payment during the draw period will not reduce the principal that is outstanding on your line.
After the draw period ends, you will no longer be able to obtain credit advances and must repay the outstanding balance over a specified period of months (the "repayment period"). During the repayment period of (repayment period), payments will be due monthly. Your minimum monthly payment will equal 1/(240)th of the principal balance that was outstanding at the end of the draw period plus finance charges that have accrued on the outstanding balance during the billing cycle.
Minimum Payment Example: If you made only the minimum payments and took no other credit advances, it would take 15 years to pay off a credit advance of $10,000 at the ANNUAL PERCENTAGE RATE of 12%. During that period, you would make 120 payments varying between 127.78 and $100, followed by 60 payments varying between $187.06 and $118.08.
Fees and Charges: To open and maintain a line of credit, you must pay the following fees to us: Annual fee of $50.00 for Owner Occupied Properties/$150.00 for Non-Owner Occupied Properties (Waived 1st Year). Unless otherwise noted, all fees will be paid at closing. You may also be required to pay certain fees to third parties to open a line. These fees generally total between $0 and $3,000.00. If you ask, we will give you an itemization of the fees you will have to pay to third parties.
Property Insurance: You must carry insurance on the property that secures the line. If the property is located in a Special Flood Hazard Area we will require you to obtain flood insurance if it is available. You may select the insurance company of your choice, provided the company and coverage meet our requirements
Transaction Requirements: There is a $10,000.00 minimum advance required on Non-Owner Occupied Properties.
Negative Amortization: Under some circumstances, your payments will not cover the finance charges that accrue and "negative amortization" will occur. Negative amortization will increase the amount that you owe us and reduce your equity in the dwelling.
Tax Deductibility: You should consult a tax advisor regarding the deductibility of interest and charges for the line.
Variable Rate Feature: The line 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 Information about the index is available in the Federal Reserve Statistical Release H-15 (www.federalreserve.gov/releases/h15). To determine the annual percentage rate that will apply to your line, we add a margin to the value of the index.
The initial annual percentage rate "discounted". A discounted rate is not based on the index and margin used for later rate adjustments. The initial discounted rate will be in effect during the first billing periods of 1 months after your line is open.
Ask us for the current index value, margins, discount and annual percentage rates. After you open a credit line, rate information will provided on periodic statements that we send you.
Rate Changes: The annual percentage rate can change monthly. The maximum ANNUAL PERCENTAGE RATE that can apply is 18.000%. Apart from this rate "cap," there is no limit on the amount by which the rate can change during any one-year period.
Maximum Rate and Payment Examples: If the ANNUAL PERCENTAGE RATE during the draw period equaled the 18% maximum and you had an outstanding balance of $10,000, the minimum monthly payment would be $150.00. This maximum ANNUAL PERCENTAGE RATE could be reached during the first month of the draw period.
If you had an outstanding balance of $10,000 at the beginning of the repayment period, the minimum monthly payment at the maximum ANNUAL PERCENTAGE RATE of 18% would be $450. This annual percentage rate could be reached during the first month of the repayment period.
Historical Example: The following table shows how the ANNUAL PERCENTAGE RATE and the minimum monthly payments for a $10,000 outstanding balance would have changed based on changes in the index over the past 15 years. The index values are from the first business day of January of each year. While only one payment amount per year is shown, payments during the repayment period would have varied during each year.
The table assumes an outstanding balance of $10,000, that only the minimum payments were made, and that the rate remained constant during each year. It does not necessarily indicate how the index or your payments will change in the future.