HOME EQUITY LOAN DISCLOSURE
IMPORTANT TERMS
of our
HOME EQUITY LINE
OF CREDIT
THIS DISCLOSURE CONTAINS INFORMATION
ABOUT OUR VARIABLE RATE, HOME EQUITY
LINE OF CREDIT. YOU SHOULD READ IT CAREFULLY
AND KEEP THIS COPY FOR YOURSELF.
ALL TERMS ARE THE SAME EXCEPT FOR WHERE
OTHERWISE INDICATED.
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 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 certain obligations in your
agreement with us.
Possible Actions
Termination and Acceleration
We can terminate the Home Equity Open-End Plan and require you to pay to us
the entire outstanding balance in one payment and charge you certain fees if:
(a) you commit fraud or material misrepresentation at any time in connection
with this Plan;
(b) you do not meet the repayment terms of this Plan;
(c) your action or inaction adversely affects the collateral for the Plan or
our rights in the collateral.
Suspension or Reduction
We can refuse to make additional extensions of credit or reduce your credit
line if:
(a) the value of your dwelling declines significantly below its appraised value
for purposes
of this Plan;
(b) we reasonably believe that you will not be able to meet the repayment
requirements
due to a material change in your financial circumstances;
(c) you are in default of a material obligation of this Plan;
(d) government action prevents us from imposing the Annual Percentage Rate
provided for under this Plan or impairs our security interest such that the
value
of the interest is less than 120 percent of credit line;
(e) a regulatory agency has notified us that continued advances would
constitute
an unsafe and unsound practice;
(f) the maximum Annual
Percentage Rate under this Plan is reached.
Change in Terms
Our home equity credit agreement permits us to make certain changes to the
terms
of this Plan at specified times or upon the occurrence of specified events.
Minimum Payment
Requirements
You can obtain advances of credit for 10 year (s) (the "draw
period"). During this draw period,
payments will be due monthly. Your minimum monthly payment will equal the
amount of accrued interest and
credit insurance premiums (if any) or $50.00 whichever is greater. The minimum
monthly payment during the draw period may 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 pay the outstanding balance on your
account (the "repayment period").
The length of the repayment period is 15 year(s). During the repayment period,
payments will be due monthly. Your
Minimum monthly payment will equal the greater of $50.00 or the amount of
accrued interest plus 0.5556% of the
principal loan account balance at the end of the draw period. Balances of less
than $100.00 must be paid in full.
Minimum Payment
Example
If you
made only the minimum monthly payment and took no other credit advances, it
would take 20 years and 2 months to pay off a credit advance of $10,000 at an
ANNUAL PERCENTAGE RATE of 3.25%. During that period, you would make 120
payments of $50.00 followed by 121 payment(s) varying between $73.80 and
$55.76, with a final payment of $40.30.
Fees and Charges
To open and maintain an account, you must pay the following fees to us:
Late Charges: If your payment is late by 15 days or more, you will be charged 5% of the principal and interest due.
Annual Fee: $25.00
You must
also pay certain fees to third parties such as appraisers, credit reporting
firms, and government agencies. These fees generally total between
$0-1700.00. If you ask, we will provide you with an itemization of the fees
you will have to pay to third parties.
Insurance
You must carry insurance on the property that secures this plan.
Private
Mortgage Insurance: If you Loan-to-Value (LTV) ratio is more than 80%, you
will be required to obtain Private Mortgage Insurance (PMI). The premium for
PMI is based on your outstanding monthly loan balance and will be added to your
loan balance each month. Generally, the estimated cost for a $10,000 loan is
approximately $8.00 per month. Your actual cost will be disclosed at the time
you open your Plan and will be reflected on your periodic statements for each
billing cycle in which PMI premiums are charged.
Access to the
Plan
You may obtain advances under your plan via loan check, in person, by mail, or
by telephone.
Transaction
Requirements
The minimum initial advance requirement is $300.00. There is no minimum
requirement for subsequent advances.
Tax Deductibility
You should consult a tax advisor regarding the deductibility of
interest and charges for this plan.
Refundability
of Fees: If
you decide not to enter into this plan within three business days of receiving
this disclosure and the home equity brochure, you are entitled to a refund of
any fee you may have already paid.
Variable Rate
Feature
The draw period has a variable rate feature, and the Annual Percentage Rate and
minimum payment can change as a result. The Annual Percentage Rate does not
include costs other than interest.
The Annual Percentage
Rate is based on the value of an index. The index is the highest rate
of interest identified as the 'Prime Rate' in the 'Money Rates' section of the Wall Street Journal. To
determine the Annual
Percentage Rate that will apply to your account, we add a margin to the value of
the index. Ask us for the current index value, margins and Annual Percentage Rates. After
you open an account, rate information will be provided on periodic statements
that we send you.
Rate Changes
The Annual Percentage
Rate can change monthly. There is no limit on the amount by which the
rate can change in any one year period. The maximum Annual Percentage Rate that can
apply during the plan is 18%. The ANNUAL PERCENTAGE RATE will not fall below
3.00% during the Plan.
Discounted
Rate: If
you qualify, your Plan may have a discounted introductory rate. Further
details will be disclosed to you on the Open-end Credit Plan.
Maximum Rate
and Payment Example
If you had an outstanding balance of $10,000.00 at the beginning of the draw
period, the minimum monthly payment at the maximum Annual Percentage Rate of 18%
would be $150.00. The maximum Annual Percentage Rate during the draw period could be
reached in the first month following an initial hold of one month.
If you had an outstanding balance of $10,000.00 at the beginning of the
repayment period, the minimum monthly payment at the maximum Annual Percentage Rate of 18%
would be $205.56. The maximum Annual Percentage Rate during the repayment period
could be reached in the first month following an initial hold of one month.
Prepayment
You may prepay all or any amounts owing under this Plan without penalty.
Historical Example
The following table shows how the percentage rate and the minimum 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 the first Monday in August. If
the first Monday is a holiday then the index values are from the first business
day following that Monday.
The table assumes that no additional credit advances were taken and that only
the minimum payment was made. It does not necessarily indicate how the index or
your payments would change in the future.
|
Year |
Index% |
Margin |
ANNUAL |
Monthly |
|
|
||||
|
1995 |
8.75 |
0.00 |
8.75 |
$72.92 |
|
1996 |
8.25 |
0.00 |
8.25 |
$68.75 |
|
1997 |
8.50 |
0.00 |
8.50 |
$70.83 |
|
1998 |
8.50 |
0.00 |
8.50 |
$70.83 |
|
1999 |
8.00 |
0.00 |
8.00 |
$66.67 |
|
2000 |
9.50 |
0.00 |
9.50 |
$79.17 |
|
2001 |
6.75 |
0.00 |
6.75 |
$56.25 |
|
2002 |
4.75 |
0.00 |
4.75 |
$50.00 |
|
2003 |
4.00 |
0.00 |
4.00 |
$50.00 |
|
2004 |
4.25 |
0.00 |
4.25 |
$50.00 |
|
|
||||
|
2005 (2) |
6.25 |
0.00 |
6.25 |
$104.82 |
|
2006 |
8.25 |
0.00 |
8.25 |
$116.03 |
|
2007 |
8.25 |
0.00 |
8.25 |
$111.45 |
|
2008 |
5.00 |
0.00 |
5.00 |
$86.63 |
|
2009 |
3.25 |
0.00 |
3.25 |
$73.93 |
|
|
||||
1. Your Annual Percentage Rate may have a discount in the first year.
2. The repayment period begins in this year.
This represents a margin we have recently used.
GOOD FAITH ESTIMATE FOR HOME EQUITY LINE
OF CREDIT AND FIXED EQUITY INSTALLMENT LOAN
Fees and Charges:
To open and maintain a Home Equity Line of Credit with us,
you could be required to pay us the following fees:
a. Document Preparation Fee: None
b. Application Fee: None
c. Prepayment Fee: None
d. Points: None
e. Annual Fee: None
f. Transaction Fee for Subsequent Advances: None
Good Faith Estimate of Third Party Fees and Charges:
A Good Faith Estimate of Fees that I may be responsible for is
as follows:
a. Appraisal Fee: $100.00 to $950.00 (e)
b. Credit Report Fee: None
c. Processing Fee: None
d. Title Fee: 125.00
(e)
e. Flood Determination: 17.00
f. Recording Fee: $69.00. (e)
g. Other (specify): ________ $ to $ (e)
An (e) means that the charge is an estimate.
WHEN YOUR HOME
IS ON THE LINE
What You Should Know About
Home Equity Lines of Credit
Federally required
disclosures from the Board of
Governors of the Federal
Reserve System.
More and more lenders are offering home equity lines of credit.
By using the equity in your home, you may qualify for a sizeable
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 this 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 loan could mean the loss
of your home.
What is a home equity line
of credit?
A home equity line 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-meaning the maximum amount you can borrow
at any one time while you have the plan.
Many lenders set the credit limit on a home equity line by
taking a percentage (usually 75 percent*) of the appraised value
of the house and subtracting the balance owed on the existing
mortgage. For example:
Appraisal of home $100,000
Percentage x 75%*
Percentage of appraised value $ 75,000
Less mortgage debt -$ 40,000
Potential credit line $ 35,000
*This example does not
necessarily reflect CCU's current
underwriting policies.
In determining your actual credit line, the lender also will
consider your ability to repay, by looking at your income, debts,
and other financial obligations, as well as your credit history.
Home equity plans often set a fixed time during which you can
borrow money, such as 10 years. When this period is up, the plan
may allow you to renew the credit line. But in a plan that does not
allow renewals, you will not be able to borrow additional money
once the time has expired. Some plans may call for payment in
full of any outstanding balance. Others may permit you to repay
over a fixed time, for example 10 years.
Once approved for the home equity plan, usually you will be
able to borrow up to your credit limit whenever you want.
Typically, you will be able to draw on your line by using special
checks. Under some plans, borrowers can use a credit card or
other means to borrow money and make purchases using the line.
However, 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 lenders also may require that you take
an initial advance when you first set up the line.
What should you look for when shopping for a plan?
If you decide to apply for a home equity line, look for the plan
that best meets your particular needs. Look carefully at the credit
agreement and examine the terms and conditions of various plans,
including the Annual
Percentage Rate (APR) and the
costs you'll pay to establish the plan. The disclosed APR 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 plan features.
Home equity plans typically involve variable interest rates
rather than fixed rates. A 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 will
change, mirroring fluctuations in the index. To figure the interest
rate that you will pay, most lenders add a margin, such as 2
percentage points, to the index value. Because the cost of
borrowing is tied directly to the index rate, it is important to find
out what index and margin each lender uses, how often the index
changes, and how high it has risen in the past.
Sometimes lenders advertise a temporarily discounted rate for
home equity lines-a rate that is unusually low and often lasts only
for an introductory period, such as six months.
Variable rate plans secured by a dwelling must have a ceiling
(or cap) on how high your interest rate can climb over the life of the
plan. Some variable rate plans limit how much your payment may
increase, and also how low your interest rate may fall if interest
rates drop. Some lenders may permit you to convert a variable rate
to a fixed interest rate during the life of the plan, or to convert all or
a portion of your line to a fixed term installment loan. Agreements
generally will permit the lender to freeze or reduce your credit line
under certain circumstances. For example, some variable rate plans
may not allow you to get additional funds during any period the
interest rate reaches the cap.
Costs to obtain a home equity line.
Many of the costs in 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, which estimates the value of
your home.
_ An application fee, which may not be refundable if you are
turned down for credit.
_ Up-front charges, such as one or more points (one point
equals one percent of the credit limit).
_ Other closing costs, which include fees for attorneys, title
search, mortgage preparation and filing, property and title
insurance, as well as taxes.
_ Certain fees during the plan. For example, some plans
impose yearly membership or maintenance fees.
_ You also may be charged 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 charges and closing costs would substantially
increase the cost of the funds borrowed. On the other hand, the
lender's risk is lower than for other forms of credit because your
home serves as collateral. Thus, Annual Percentage Rates for home
equity lines are generally lower than rates for other types of credit.
The interest you save could offset the initial costs of obtaining the
line. In addition, some lenders may waive a portion 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 any
money you might borrow. Some plans set minimum payments that
cover a portion of the principal (the amount you borrow) plus
accrued interest. But, unlike the typical installment loan, the portion
that goes toward principal may not be enough to repay the debt by
the end of the term. Other plans may allow payments 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
entire sum when the plan ends.
Regardless of the minimum payment required, you can pay
more than the minimum and many lenders may give you a choice of
payment options. Consumers often will 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.
With a variable 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
initial payments would be $83 monthly. If the rate should rise over
time to 15 percent, your payments will increase to $125 per month.
Even with payments that cover interest plus some portion of the
principal, there could be a similar increase in your monthly
payment, unless the agreement calls for keeping payments level
throughout the plan.
When you sell your home, you will be required to pay off your
home equity line in full. If you are likely to sell your house in the
near future, consider whether it makes sense to pay the up-front
costs of setting up an equity credit line. Also keep in mind that
leasing your home may be prohibited under the terms of your home
equity agreement.
Comparing a line of credit
and a traditional second mortgage loan.
If you are thinking about a home equity line of credit you also
might want to consider a more traditional second mortgage loan.
This type of loan provides you with a fixed amount of money
repayable over a fixed period. Usually the payment schedule calls
for equal payments that will pay off the entire loan within that time.
You might consider a traditional second mortgage loan 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 the APR and other
charges. You cannot, however, simply compare the APR for a
traditional mortgage loan with the APR for a home equity line
because the APRs are figured differently.
_ The APR for a traditional mortgage takes into account the
interest rate charged plus points and other finance charges.
_ The APR for a home equity line is based on the periodic
interest rate alone. It does not include points or other charges.
Disclosures from Lenders.
The 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. If you have not received this
information from the lender, any application fees you have been
charged must be refunded. You usually get these disclosures when
you receive an application form, and you should get additional
disclosures before the plan is opened. If any term has changed
before the plan is opened (other than a variable-rate feature), the
lender must return all fees if you decide not to enter into the plan
because of the changed term. When you open a home equity line,
the transaction puts your home at risk. The Truth-in-Lending Act
gives you three 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 three-day
period. The lender must then cancel the security 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 value) of
the home and your 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 principal and interest.
Points. One point is equal to one 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 the institution's enforcement agency.
State Member Banks of the Federal Reserve System
Division of Consumer and Community Affairs
Mail Stop 801 Federal Reserve Board
Washington, DC 20551
(202) 452-3693
www.federalreserve.gov
National Banks
Office of the Comptroller of the Currency
Customer Assistance Unit
1301 McKinney Street, Suite 3710
Houston, TX 77010
(800) 613-6743
www.occ.treas.gov
Federal Credit Unions
National Credit Union Administration
1775 Duke Street
Alexandria, VA 22314
(703) 518-6330
www.ncua.gov
Federally Insured Non-Member State-Chartered Banks and
Savings Banks
Federal Deposit Insurance Corporation
Office of Compliance and Consumer Affairs
550 Seventeenth Street, N.W.
Washington, DC 20429
(800) 934-FDIC o (202) 942-3100
www.fdic.gov
Federally Insured Savings and Loan Institutions and Federally
Chartered Savings Banks
Office of Thrift Supervision
Consumer Programs
1700 G Street, N.W. 6th Floor
Washington, DC 20552
(202) 906-6237 or (800) 842-6929
www.ots.treas.gov
Mortgage Companies and Other Lenders
Federal Trade Commission
Consumer Response Center
600 Pennsylvania Avenue, N.W.
Washington, DC 20580
(202) 326-3758 or (877)FTC-HELP
www.ftc.gov
CHECK LIST
Ask your lender to help fill out this check list.
Basic Features
Fixed Annual
Percentage Rate
Variable Annual
Percentage Rate
Index used and current value
Amount of margin
Frequency of rate adjustments
Amount/length of discount (if any)
Interest rate cap and floor
Length of plan
Draw period
Repayment period
Initial Fees
Appraisal fee
Closing costs
Application fee
Up-front charges, including points
Repayment Terms
During the draw period
Interest and principal payments
Interest only payments
Fully amortizing payments
When the draw period
ends
Balloon payment
Renewal available
Refinancing of balance by lender
Plan A and Plan B
Products and Services
Checking Accounts
Savings Accounts
Money Market Accounts
Certificate Accounts
Individual Retirement Certificates
Trust Accounts
Business Accounts
CCU Check Cards
CCU ATM Cards
Touch Tone Telephone Teller System
PC Branch
Direct Deposit
Automatic Payment
Visa® Credit Cards
Vehicle Loans
Real Estate Mortgages
Home Equity Line
Personal Loans
Recreational Vehicle Loans
Student Loans
Share Secured Loans
Certificate Secured Loans
Notary Public Signature Service
Commercial
Services
Auto-Buying and Research Services
U.S. Savings Bonds
Coventry
Credit Union
2006 Nooseneck
Hill Road
Coventry, RI
02816
(800) 397-1900 *
(401) 397-1900
www.coventrycu.org
coventrycu@coventrycu.org
Federally insured by NCUA
I have read the Home Equity Loan Disclosure, Good Faith Estimate and "When
Your Home is on the Line" displayed and agree to the terms and conditions.