What safeguards are built into the (Home Equity) loan ?
One of the best protections you have is the Federal Truth in Lending Act, which requires lenders to inform you about the terms and costs of the plan at the time you are given an application. Lenders must disclose the APR and payment terms and must inform you of charges to open or use the account, such as an appraisal, a credit report, or attorneys' fees. Lenders also must tell you about any variable-rate feature and give you a brochure describing the general features of home equity plans.
The Truth in Lending Act also protects you from changes in the terms of the account (other than a variable-rate feature) before the plan is opened. If you decide not to enter into the plan because of a change in terms, all fees you paid earlier must be returned to you.
Because your home is at risk when you open a home equity credit account, you have three days to cancel the transaction, for any reason. To cancel, you must inform the lender in writing. Following that, your credit line must be cancelled and all fees you have paid must be returned.
Once your home equity plan is opened, if you pay as agreed, the lender, in most cases, may not terminate your plan, accelerate payment of your outstanding balance, or change the terms of your account. The lender may halt credit advances on your account during any period in which interest rates exceed the maximum rate cap in your agreement, if your contract permits this practice.
Home Equity Credit Lines
Is a home equity credit line for you?
How much money can you borrow on a home equity credit line?
What is the interest rate on the home equity loan?
What are the upfront closing costs?
What are the continuing costs?
What are the repayment terms during the loan?
What are the repayment terms at the end of the loan?
What safeguards are built into the loan?
Information is adapted from "Home Equity Credit Lines" a free brochure provided by the Federal Trade Commission.
Home Equity Line of Credit Resources
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