What you should know about
Home Equity Lines
of Credit
The Federal Reserve Board
Board of Governors of the Federal Reserve System
www.federalreserve.gov
0708
i | What You Should Know about Home Equity Lines of Credit
Table of contents
Home Equity Plan Checklist ............................................................
2
What is a home equity line of credit? ........................................
3
What should you look for when shopping for a plan? ...................
4
Costs of establishing and maintaining a home equity line ............
5
How will you repay your home equity plan? ..................................
6
Lines of credit vs. traditional second mortgage loans ....................
8
What if the lender freezes or reduces your line of credit? ............. 10
Glossary ..................................................................................................... A1
Where to go for help ............................................................................ A4
More resources and ordering information ............................... A6
Print orders ............................................................................................ A6
ii | What You Should Know about Home Equity Lines of Credit
1 | What You Should Know about Home Equity Lines of Credit
If you are in the
market for credit, a
home equity plan
is one of several
options that might be
right for you. Before making a decision, how-
ever, 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 risks.
And remember, failure to repay the amounts
you’ve borrowed, plus interest, could mean the
loss of your home.
2 | What You Should Know about Home Equity Lines of Credit
Home Equity Plan Checklist
Ask your lender to help fill out this checklist.
Basic Features
Plan A
Plan B
Fixed annual percentage rate
%
%
Variable annual percentage rate
%
%
Q Index