Home Equity Lines of Credit (HELOC) are typically a junior or second mortgage, which secures a preset line of credit that a borrower may access. The balance fluctuates as funds are advanced on the line and reduces as the borrower repays the funds.
A home equity line of credit is usually tied to a variable interest rate. This means the rate can go up or down over the term of the loan because it is linked to an independent benchmark or index, like the U.S. Prime Rate. These loans have what are referred to as, interest rate floors and ceilings, which limit rate movement up or down and are typically written as 5-year term Balloons.*
With HELOCs through Sauk Valley Bank, customers have several options as far as repayments. Available options are:
- Interest only payments
- Monthly or quarterly payments
- 1% or 2% of the balance
A fixed rate second mortgage, at a 5-year term balloon and amortized up to 10-years is another available option for customers.
For example, if one had an outstanding balance of $10,000.00, the minimum payment at the maximum ANNUAL PERCENTAGE RATE of 15.000% would be $127.40. This ANNUAL PERCENTAGE RATE could be reached at the time of the 1st payment.
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*Balloon payments are lump-sum payments that may be required when the plan ends.
INDEX: The annual percentage rate is based on the value of an index (referred to in this disclosure as the “Index”). The Index is the base rate on corporate loans posted by at least 70% of the 10 largest U.S. banks known as the Wall Street Journal U.S. Prime Rate. Information about the Index is available or published in the Wall Street Journal. We will use the most recent Index value available to us as of the date of any annual percentage rate adjustment. If the Index is no longer available, we will choose a new Index and margin. The new Index will have a historical movement substantially similar to the original Index, and the new Index and margin will result in an annual percentage rate that is substantially similar to the rate in effect at the time the original Index becomes unavailable.
ANNUAL PERCENTAGE RATE. To determine the Periodic Rate that will apply to your account, we add a margin to the value of the Index, round that sum to the nearest 0.001%, then divide the rounded value by 365 days. To obtain the ANNUAL PERCENTAGE RATE we multiply the Periodic Rate by the number of days in a year (366 during leap years). This result is the ANNUAL PERCENTAGE RATE. A change in the Index rate generally will result in a change in the ANNUAL PERCENTAGE RATE. The amount that your ANNUAL PERCENTAGE RATE may change also may be affected by the lifetime annual percentage rate limits, as discussed below. Please ask us for the current Index value, margin and annual percentage rate. After you open a credit line, rate information will be provided on periodic statements that we send you.