A HELOC has a 10-year draw period followed by a 15-year repayment period. What happens to the borrower's payment obligations when the draw period ends?
Correct Answer
B) Payments convert to principal and interest over the remaining term
When the draw period ends, the HELOC typically converts to the repayment period where the borrower must make principal and interest payments to fully amortize the outstanding balance over the remaining term (15 years in this example).
Why This Is the Correct Answer
When the draw period ends, the HELOC typically converts to the repayment period where the borrower must make principal and interest payments to fully amortize the outstanding balance over the remaining term (15 years in this example).
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During loan processing, the borrower provides a gift letter for the down payment, but the donor's bank statement shows the funds came from a recent large deposit rather than seasoned funds. What additional documentation is most likely required?
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A borrower has a primary mortgage of $300,000 and a HELOC with a $50,000 outstanding balance. They want to refinance both debts into a single new mortgage of $360,000. The extra $10,000 will cover closing costs and a small amount of cash back. How should this be classified?