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ANHEUSER-BUSCH EMPLOYEES’ CREDIT UNION 1001 Lynch Street St. Louis, MO 63118-1803
IMPORTANT TERMS OF OUR HOME EQUITY LINE OF CREDIT
This disclosure contains important information about our Home Equity Line of Credit. You should read it carefully and keep a copy for your records. Availability of Terms: All of the terms described below are subject to change prior to the opening of your Home Equity account. If 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 security interest in 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, 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. · You do not meet the repayment terms. · Your action or inaction adversely affects the collateral or our rights in the collateral. We can refuse to make additional extensions of credit or reduce your credit limit if: · The value of the dwelling securing the line declines significantly below its appraised value for purposes of the line such as your encumbered equity declining by 50% or more. · 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 our security interest such that the value of the interest is less than 120 percent of the credit line. · A regulatory agency has notified us that continued advances would constitute an unsafe and unsound practice. · The maximum annual percentage rate is reached. Minimum Payment Requirements: DRAW PERIOD - You can obtain advances of credit during the draw period. The draw period is ten (10) years after the opening date. The draw period for your Home Equity Visa Credit Card and card expiration will not exceed ten (10) years. The minimum payment during the draw period is (a) calculated based upon 1.5% of your new total balance each month or $50.00, whichever, is greater or (b) your total new balance if less than $50.00 plus (c) any portion of the minimum payment(s) shown on prior statements which remains unpaid. In addition, any time your total new balance exceeds your credit limit, you must immediately pay the excess upon our demand. After the draw period ends the repayment period will begin and you will no longer be able to obtain Credit Advances. You must make regular monthly payments during both the draw and repayment periods. REPAYMENT PERIOD - The repayment period begins after the expiration of the ten (10) year draw period. The minimum payment due during the repayment period is calculated for a fifteen (15) year amortization schedule. Since negative amortization is not allowed during the repayment period, the minimum monthly payment due during the repayment period will be recalculated monthly to represent a fifteen (15) year amortization schedule based upon the current interest rate in effect on the first day of each month. The minimum monthly payment will be (a) the greater of this recalculation or $50.00 or (b) your total new balance if less than $50.00 plus (c) any portion of the minimum payment(s) shown on prior statement(s) which remains unpaid. Your monthly statement will indicate any change in your required monthly payment based upon this fifteen (15) year amortization. During both the draw and repayment periods, regular monthly payments will be due. You agree to pay not less than the minimum payment on or before the due date. Minimum Payment Example: If you made only the minimum payment and took no other credit advances, it would take 209 months to pay off a credit advance of 10,000.00 at an ANNUAL PERCENTAGE RATE of 7.250%. You would make 120 monthly payments varying between $150.00 and $51.44 during the draw period. You would make 88 payments of $50.00 during the repayment period followed by a final payment of $37.63. Fees and Charges: Photocopy of credit line account- $2.00 per page; Over-limit charge- $15.00 if you exceed your credit limit by 2% of your credit line; Return check charge- $20.00; Reissue lost or stolen card- $5.00 for the first occurrence; $20.00 for the second; Unreturned card fee- $25.00 if card not surrendered at our request; Sales receipt fee- $10.00 for copy of a sales receipt. Third Party Fees: You may pay certain fees to third parties. These fees generally total between $100.00 and $600.00. If you ask, we will give you an itemization of the fees you may have to pay to third parties. If we pay third party fees (closing costs) on your behalf and, if whatever reason, your credit line account is closed within 18 months of the opening date, you will reimburse us for all amounts we paid for you. Late Fee: If your payment is 15 or more days late, you will be charged $15.00 or an amount not to exceed __________% of each installment or minimum payment due, whichever is greater. Transaction Requirements: You must carry insurance on the property that secures this loan. The minimum amount of the first credit advance is $5,000.00. There is no minimum subsequent advance amount. Tax Deductibility: You should consult a tax advisor regarding the deductibility of interest and charges for the line. Variable-Rate Feature: This plan has a variable-rate feature and the annual percentage rate (corresponding to the periodic rate), and minimum 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. Rate Discount: The initial ANNUAL PERCENTAGE RATE is not based on the Index and margin used for later rate adjustments. The initial ANNUAL PERCENTAGE RATE will be in effect for _______months. Thereafter, the ANNUAL PERCENTAGE RATE will be based on the Index plus a margin. Description of Index: The index is the Prime Rate as published in the Wall Street Journal. When a range of rates is published we will use the highest. Source of Index: The index is published in the Wall Street Journal. If the index is no longer available, we will choose a new index which is based on comparable information. To determine the annual percentage rate that will apply to your line, we add a margin to the value of the index. 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. Rate Changes: The annual percentage rate can change on the first day of the billing cycle in the month following a change in the Index. We will use the index value as of the 15th day of the month before the month of any annual percentage rate adjustment. The maximum ANNUAL PERCENTAGE RATE that can apply is 15.00%. The minimum ANNUAL PERCENTAGE RATE that can apply is 4.25% (except during an introductory period). Maximum Rate and Payment Examples: If you had an outstanding balance of $10,000 at the beginning of the draw period, the minimum monthly payment at the maximum ANNUAL PERCENTAGE RATE of 15.00% would be $150.00. This annual percentage rate could be reached after the first month of the draw period. If you had an outstanding balance of $10,000 at the beginning of the repayment period, the minimum monthly payment at the maximum ANNUAL PERCENTAGE RATE of 15.00% would be $161.47. This annual percentage rate could be reached after the first month of the repayment period. |
2009 ConmarSystems, Inc., Peachtree City, GA 30269 - EFORM 11197-1
Historical Examples: The following tables show how the annual percentage rate and the minimum payments for a single $10,000 credit advance would have changed based on changes in the index using a low and higher margin over the last 15 years. The Index values are from the first business day of January of each year. While only one payment amount per year is shown, payments may have varied during each year. The table assumes that no additional credit advances were taken, that only the minimum payment was made, and that the rate remained constant during each year. It does not necessarily indicate how the index or your payments would change in the future. |
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|
YEAR
|
INDEX (%)
|
MARGIN (%) *
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ANNUAL PERCENTAGE RATE
|
MINIMUM PAYMENT ($)
|
|
|
REPAYMENT PERIOD
|
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
2005 2006 2007 2008 2009 |
8.500 8.500 8.250 8.500 7.750 8.500 9.500 4.750 4.250 4.000
5.250 7.250 8.250 7.250 3.250 |
0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
0.000 0.000 0.000 0.000 0.000 |
8.250** 8.500 8.250 8.500 7.750 8.500 9.500 4.750 4.250 4.250
5.250 7.250 8.250 7.250 3.250 |
150.00 136.01 123.64 112.11 101.91 91.94 83.57 76.74 67.17 43.49
50.00 50.00 50.00 50.00 50.00 |
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* This is a margin we have used recently. ** This rate reflects a .25% discount we have used recently. |
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DRAW PERIOD
REPAYMENT PERIOD
|
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
2005 2006 2007 2008 2009 |
8.500 8.500 8.250 8.500 7.750 8.500 9.500 4.750 4.250 4.000
5.250 7.250 8.250 7.250 3.250 |
4.000 4.000 4.000 4.000 4.000 4.000 4.000 4.000 4.000 4.000
4.000 4.000 4.000 4.000 4.000 |
12.500 12.500 12.250 12.500 11.750 12.500 13.500 8.750 8.250 8.000
9.250 11.250 12.250 11.250 7.250 |
150.00 141.95 134.34 126.81 120.01 112.72 106.67 101.84 92.81 84.15
64.96 70.13 72.55 70.36 63.05
|
2009 ConmarSystems, Inc., Peachtree City, GA 30269 - EFORM 11197-1
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, however, 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.
What is a home equity line of credit?
A home equity line of credit is a form of revolving credit in which your home serves as collateral. Because a home often is a consumer's most valuable asset, many homeowners use home equity credit lines only for major items, such as education, home improvements, or medical bills, and choose not to use them for day-to-day expenses.
With a home equity line, you will be approved for a specific amount of credit. Many lenders set the credit limit on a home equity line by taking a percentage (say, 75%) of the home's appraised value and subtracting from that the balance owed on the existing mortgage. For example:
Appraised Value of home |
$100,000 |
|
Percentage |
x 75% |
|
Percentage of appraised value |
= $75,000 |
Less balance owed on mortgage |
- $40,000 |
|
Potential credit line |
$35,000 |
In determining your actual credit limit, the lender will also consider your ability to repay the loan (principal and interest) by looking at your income, debts, and other financial obligations as well as your credit history.
Many home equity plans set a fixed period during which you can borrow money, such as 10 years. At the end of this "draw period," you may be allowed to renew the credit line. If your plan does not allow renewals, you will not be able to borrow additional money once the period has ended. Some plans may call for payment in full of any outstanding balance at the end of the period. Others may allow repayment over a fixed period (the "repayment period"), for example, 10 years.
Once approved for a home equity line of credit, you will most likely be able to borrow up to your credit limit whenever you want. Typically, you will use special checks to draw on your line. Under some plans, borrowers can use a credit card or other means to draw on the line.
There may be other 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) or keep a minimum amount outstanding. Some plans may also require that you take an initial advance when the line is set up.
What should you look for when shopping for a plan?
If you decide to apply for a home equity line of credit, look for the plan that best meets your particular needs. Read the credit agreement carefully, and examine the terms and conditions of various plans, including the annual percentage rate (APR) and the costs of establishing the plan. Remember, though, that the APR for a home equity line is based on the interest rate alone and will not reflect closing costs and other fees and charges, so you’ll need to compare these costs, as well as the APRs, among lenders.
Variable interest rates
Home equity lines of credit typically involve variable rather than fixed interest rates. The 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). In such cases, the interest rate you pay for the line of credit will change, mirroring changes in the value of the index. Most lenders cite the interest rate you will pay as the value of the index at a particular time, plus a "margin," such as 2 percentage points. Because the cost of borrowing is tied directly to the value of the index, it is important to find out which index is used, how often the value of the index changes, and how high it has risen in the past. It is also important to note the amount of the margin.
Lenders sometimes offer a temporarily discounted interest rate for home equity lines--an "introductory" rate that is unusually low for a short period, such as 6 months.
Variable-rate plans secured by a dwelling must, by law, have a ceiling (or cap) on how much your interest rate may increase over the life of the plan. Some variable-rate plans limit how much your payment may increase and how low your interest rate may fall if the index drops.
Some lenders allow you to convert from a variable interest rate to a fixed rate during the life of the plan, or let you convert all or a portion of your line to a fixed-term installment loan.
Costs of establishing and maintaining a home equity line
Many of the costs of 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 to estimate the value of your home;
· An application fee, which may not be refunded if you are turned down for credit;
· Up-front charges, such as one or more "points" (one point equals 1 percent of the credit limit); and
· Closing costs, including fees for attorneys, title search, mortgage preparation and filing, property and title insurance, and taxes.
In addition, you may be subject to certain fees during the plan period, such as annual membership or maintenance fees and a transaction fee every time you draw on the credit line.
You could find yourself paying hundreds of dollars to establish the plan. And if you were to draw only a small amount against your credit line, those initial charges would substantially increase the cost of the funds borrowed. On the other hand, because the lender's risk is lower than for other forms of credit, as your home serves as collateral, annual percentage rates for home equity lines are generally lower than rates for other types of credit. The interest you save could offset the costs of establishing and maintaining the line. Moreover, some lenders waive some 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 the money you borrow. Some plans set a minimum monthly payment that includes a portion of the principal (the amount you borrow) plus accrued interest. But, unlike with typical installment loan agreements, the portion of your payment that goes toward principal may not be enough to repay the principal by the end of the term. Other plans may allow payment of interest only during the life of the plan, which means that you pay nothing toward the principal. If you borrow $10,000, you will owe that amount when the payment plan ends.
Regardless of the minimum required payment on your home equity line, you may choose to pay more, and many lenders offer a choice of payment options. Many consumers 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.
If your plan has a variable interest 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% interest rate, your monthly payments would be $83. If the rate rises over time to 15%, your monthly payments will increase to $125. Similarly, if you are making payments that cover interest plus some portion of the principal, your monthly payments may increase, unless your agreement calls for keeping payments the same throughout the plan period.
If you sell your home, you will probably be required to pay off your home equity line in full immediately. If you are likely to sell your home in the near future, consider whether it makes sense to pay the up-front costs of setting up a line of credit. Also keep in mind that renting your home may be prohibited under the terms of your agreement.
Lines of credit vs. traditional second mortgage loans
If you are thinking about a home equity line of credit, you might also want to consider a traditional second mortgage loan. This type of loan provides you with a fixed amount of money, repayable over a fixed period. In most cases, the payment schedule calls for equal payments that pay off the entire loan within the loan period. You might consider a second mortgage 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 both the APR and other charges. Do not, however, simply compare the APRs, because the APRs on the two types of loans are figured differently:
The APR for a traditional second mortgage loan takes into account the interest rate charged plus points and other finance charges.
The APR for a home equity line of credit is based on the periodic interest rate alone. It does not include points or other charges.
Disclosures from lenders
The federal 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. And in general, neither the lender nor anyone else may charge a fee until after you have received this information. You usually get these disclosures when you receive an application form, and you will get additional disclosures before the plan is opened. If any term (other than a variable-rate feature) changes before the plan is opened, the lender must return all fees if you decide not to enter into the plan because of the change.
When you open a home equity line, the transaction puts your home at risk. If the home involved is your principal dwelling, the Truth in Lending Act gives you 3 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 3-day period. The lender must then cancel its security interest in your home and return all fees--including any application and appraisal fees--paid to open the account.
What if the lender freezes or reduces your line of credit?
Plans generally permit lenders to freeze or reduce a credit line if the value of the home "declines significantly" or, when the lender "reasonably believes" that you will be unable to make your payments due to a "material change" in your financial circumstances. If this happens, you may want to:
Glossary
Annual membership or maintenance fee: An annual charge for access to a financial product such as a line of credit, credit card, or account. The fee is charged regardless of whether or not the product is used.
Annual percentage rate (APR): The cost of credit, expressed as a yearly rate. For closed-end credit, such as car loans or mortgages, the APR includes the interest rate, points, broker fees, and other credit charges that the borrower is required to pay. An APR, or an equivalent rate, is not used in leasing agreements.
Application fee: Fees charged when you apply for a loan or other credit. These fees may include charges for property appraisal and a credit report.
Balloon payment: A large extra payment that may be charged at the end of a mortgage loan or lease.
Cap (interest rate): A limit on the amount that your interest rate can increase. Two types of interest-rate caps exist. Periodic adjustment caps limit the interest-rate increase from one adjustment period to the next. Lifetime caps limit the interest-rate increase over the life of the loan. By law, all adjustable-rate mortgages have an overall cap.
Closing or settlement costs: Fees paid when you close (or settle) on a loan. These fees may include application fees; title examination, abstract of title, title insurance, and property survey fees; fees for preparing deeds, mortgages, and settlement documents; attorneys' fees; recording fees; estimated costs of taxes and insurance; and notary, appraisal, and credit report fees. Under the Real Estate Settlement Procedures Act, the borrower receives a good faith estimate of closing costs within three days of application. The good faith estimate lists each expected cost as an amount or a range.
Credit limit: The maximum amount that may be borrowed on a credit card or under a home equity line of credit plan.
Equity: The difference between the fair market value of the home and the outstanding balance on your mortgage plus any outstanding home equity loans.
Index: The economic indicator used to calculate interest-rate adjustments for adjustable-rate mortgages or other adjustable-rate loans. The index rate can increase or decrease at any time. See also Selected Index Rates for ARMs over an 11-year Period www.federalreserve.gov/pubs/ arms/arms_english.htm) for examples of common indexes that have changed in the past.
Interest rate: The percentage rate used to determine the cost of borrowing money, stated usually as a percentage of the principal loan amount and as an annual rate.
Margin: The number of percentage points the lender adds to the index rate to calculate the ARM interest rate at each adjustment.
Minimum payment: The lowest amount that you must pay (usually monthly) to keep your account in good standing. Under some plans, the minimum payment may cover interest only; under others, it may include both principal and interest.
Points (also called discount points): One point is equal to 1 percent of the principal amount of a mortgage loan. For example, if a mortgage is $200,000, one point equals $2,000. Lenders frequently charge points in both fixed-rate and adjustable-rate mortgages to cover loan origination costs or to provide additional compensation to the lender or broker. These points usually are paid at closing and may be paid by the borrower or the home seller, or may be split between them. In some cases, the money needed to pay points can be borrowed (incorporated in the loan amount), but doing so will increase the loan amount and the total costs. Discount points (also called discount fees) are points that you voluntarily choose to pay in return for a lower interest rate.
Security interest: If stated in your credit agreement, a creditor's, lessor's, or assignee's legal right to your property (such as your home, stocks, or bonds) that secures payment of your obligation under the credit agreement.
Transaction fee: Fee charged each time a withdrawal or other specified transaction is made on a line of credit, such as a balance transfer fee or a cash advance fee.
Variable rate: An interest rate that changes periodically in relation to an index, such as the prime rate. Payments may increase or decrease accordingly.
Where to go for help
For additional information or to file a complaint about a bank, savings and loan, credit union, or other financial institution, contact one of the following federal agencies, depending on the type of institution.
All phone numbers in this list that begin with the area code 800, 866, 877, and 888 are toll free.
State-chartered bank members of the Federal Reserve System
Federal Reserve Consumer Help
PO Box 1200 - Minneapolis, MN 55480
888-851-1920 (toll free) - 877-766-8533 (TTY) (toll free) - 877-888-2520 (fax) (toll free)
e-mail: [email protected] - www.FederalReserveConsumerHelp.gov
National banks and national-bank-owned mortgage companies (1)
Office of the Comptroller of the Currency (OCC) - Customer Assistance Group
1301 McKinney Street, Suite 3450 - Houston, TX 77010
800-613-6743 (toll free) - 713-336-4301 (fax)
e-mail: [email protected] - www.occ.treas.gov - www.helpwithmybank.gov
Federally chartered credit unions (2)
National Credit Union Administration (NCUA) - Office of Public and Congressional Affairs
1775 Duke Street - Alexandria, VA 22314
800-755-1030 (toll free) - 703-518-6409 (fax)
e-mail: [email protected] - www.ncua.gov/ConsumerInformation/index.htm
For state-chartered credit unions, contact the regulatory agency in the state in which the credit union is chartered.
Federally insured state-chartered banks that are not members of
the Federal Reserve System
Federal Deposit Insurance Corporation (FDIC) - Consumer Response Center
2345 Grand Blvd., Suite 100 - Kansas City, MO 64108
877-ASK-FDIC (877-275-3342) (toll free)
e-mail: [email protected] - www.fdic.gov/consumers/consumer/ccc/index.html
Savings and loan associations (3)
Office of Thrift Supervision (OTS) - Consumer Affairs
1700 G Street, NW - Washington, DC 20552
800-842-6929 (toll free) - 800-877-8339 (TTY) (toll free)
www.ots.treas.gov
Mortgage companies and other lenders
Federal Trade Commission (FTC) - Consumer Response Center
600 Pennsylvania Avenue, NW - Washington, DC 20580
202-326-3758 or (877) FTC-HELP - 866-FTC-HELP (877-382-4357) (toll free)
www.ftc.gov
Footnotes
1 Banks with “National” in their name or “N.A.” after the name.
2 Credit unions with “Federal” in their name.
3 Federally chartered and some state-chartered associations.
Home Equity Plan Check List
Ask your lender to help fill out this check list.
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Basic Features |
Plan A |
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Plan B |
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Fixed annual percentage rate |
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Variable annual percentage rate |
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· Index used and current value |
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· Amount of margin |
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· Frequency of rate adjustments |
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· Amount/length of discount (if any) |
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· Interest rate cap and floor |
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Length of Plan |
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Draw period |
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Repayment period |
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Initial fees |
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Appraisal fee |
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Application fee |
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Up-Front Charges (including points) |
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Closing Costs |
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Repayment Terms |
Plan A |
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Plan B |
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During the draw period |
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Interest and principal payments |
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Interest only payments |
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Fully amortizing payments |
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When the draw period ends |
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Balloon payment |
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Renewal available |
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Refinancing of balance by lender? |
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