Adjustable Rate Mortgage Disclosures
Home Equity Line of Credit: HELOC
Early ARM Disclosure Statement
IMPORTANT LOAN INFORMATION – PLEASE READ CAREFULLY
This disclosure contains important information about our home equality line of credit (HELOC). You should read it carefully and keep a copy for your records.
AVAILABILITY OF TERMS
All the terms described below are subject to change.
If the terms change (other than the annual percentage rate) and you decide 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 connections with your application.
SECURITY INTEREST
We will take a mortgage on your home. You could lose your home if you do not meet the obligations in your agreement with us.
POSSIBLE ACTIONS
We can terminate your line and require you to pay us the entire outstanding balance in one payment if:
- You engage in fraud or material misrepresentation in connection with the line of credit.
- You do not meet the repayment terms.
- Your action or inaction adversely affects the collateral or our rights in the collateral.
We can refused to make additional extensions of credit or reduce your credit limit, if:
- The value of the collateral securing the line of credit declines significantly below its appraised value for purposes of the line of credit.
- We reasonably believe you will not be able to meet the repayment requirements due to a material change in your financial circumstances.
- You are in default of a material obligation in the agreement.
- Government action prevents us from imposing the annual percentage rate provided for or impairs the priority of our security interest such that the value of the interest is less than 120 percent of the credit line.
- The maximum annual percentage rate is reached.
- The initial agreement permits us to make changes to the terms of the Agreement at specified times or upon the occurrence of the specified events.
- A regulatory agency has notified us that continued advances would constitute an unsafe and unsound practice.
MINIMUM PAYMENT REQUIREMENTS
You can obtain advances of credit for 10 years. This period is referred to as the “Draw Period”. During the draw period, payments will be due monthly. Your minimum monthly payment will equal the finance charges (interest) accrued on the outstanding balance during the billing period. The minimum payment during the draw period will 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 repay the outstanding balance over 15 years referred to as the “Repayment Period”. During the repayment period, payments will be due monthly. Your minimum monthly payment will equal the balance outstanding at the end of the draw period plus finance charges that have accrued on the outstanding balance during the billing cycle.
MINIMUM PAYMENT EXAMPLE
If you took a single $10,000 advance and the Annual Percentage Rate was 5.500%, it would take 25 years to pay off the advance if you only made the minimum payment. During the draw period, you would make 120 monthly payments of $45.83, followed by $180 monthly payments of $81.71 during the repayment period.
RECOVERY OF COSTS FEES
The following closing costs are the estimated fees associated with your loan:
You understand these are the closing costs paid by the Credit Union on behalf of the undersigned. Unless otherwise noted, all fees will be paid at closing. You are responsible for paying only $600.00 processing fee at closing.
MINIMUM DRAW REQUIREMENTS
There is no minimum credit advance required.
DEDUCTIBILITY
You should consult a tax advisor regarding the deductibility of interest and charges for the line.
VARIABLE RATE FEATURE
The line has a variable rate feature, and the annual percentage rate (corresponding to the periodic rate) and the minimum monthly payment can change as a result.
The annual percentage rate includes only interest and no other costs.
The annual percentage rate is based on the value of an index. The index is the highest “Prime Rate” as published in the “Money Rates” table of the online or print edition of the Wall Street Journal. To determine the annual percentage rate that will apply to your line, we add a margin to the value of the index. If the annual percentage rate is not already rounded, we then round to the nearest 0.125%. Ask us for the current index value, margin, and annual percentage rate. After you open a line of credit, rate information will be provided in the monthly billing statements that are sent to you.
RATE CHANGES
The annual percentage rate can change monthly. The rate cannot increase or decrease more than 2.000% at each change date or in any one month period. The maximum Annual Percentage Rate that can apply is 18.000% or the maximum permitted by law, whichever is less. However, under no circumstances will your Annual Percentage Rate go below 4.000% at any time during the term of the plan.
MAXIMUM RATE AND PAYMENT EXAMPLES
If you had an outstanding balance of $10,000 during the draw period, the monthly payment at the maximum Annual Percentage Rate of 18.000% would be $150.00. If you had an outstanding balance of $10,000 during the repayment period, the minimum monthly payment at the maximum Annual Percentage Rate of 18.000% would be $161.04. This annual percentage rate could be reached in 9 years.
HISTORICAL EXAMPLE
The following table shows how the Annual Percentage Rate and the minimum monthly payments for a $10,000 outstanding balance would have changed based on changes in the index over the past 15 years. The index values are from the first business day of January of each year. While only one payment amount per year is shown, payments during the repayment period would have varied during each year.
The table assumes an outstanding balance of $10,000, that only the minimum payments were made, and the rate remained constant during each year. It does not necessarily indicate how the index of your payments will change in the future.
* MARGIN: The margin disclosed is one used recently; your margin may be different. The margin may be as low as 0.000% and as high as 2.250%.
** MAX ADJUSTMENT: If ** are indicated in the Annual Percentage Rate Column, this will reflect that the figure reflects the maximum rate adjustment of 2.000% per year.
*** FLOOR RATE: If *** are indicated in the Annual Percentage Rate Column, this will reflect that the rate has reached the Floor Cap and cannot go lower even if the Index goes lower than the floor rate.
**** CAP RATE: If **** are indicated in the Annual Percentage Rate Column, this reflects that the rate has reached the Lifetime Cap for the loan and cannot go higher, even if the Index increases.