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Glossary of Terms

Annual membership or participation fee. An amount that is charged annually for having the line of credit available. It is charged regardless of whether or not you use the line.

Annual percentage rate (APR). The cost of credit on a yearly basis expressed as a percentage.

Application fee. Fees that are paid upon application. An application fee may include charges for property appraisal and a credit report.

Balloon payment. A lump-sum payment that you may be required to make under a plan when the plan ends.

Cap. A limit on how much the variable-interest rate can increase during the life of the plan.

Closing Costs. Fees paid at closing, including attorneys' fees, fees for preparing and filing a mortgage, for taxes, title search, and insurance.

Credit limit. The maximum amount that you can borrow under the home equity plan.

Equity. The difference between the fair market value (appraised value) of your home and your outstanding mortgage balance.

Index. The base for rate changes that the lender uses to decide how much the annual percentage rate will change over time.

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 to be charged.

Minimum payment. The minimum amount that you must pay (usually monthly) on your account. In some plans, the minimum payment may be "interest only." In other plans, the minimum payment may include principal and interest.

Points. A point is equal to one percent of the amount of your credit line. Points usually are collected at closing, and are in addition to monthly interest.

Security interest. An interest that a lender takes in the borrower's property to assure 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.