Annual membership or maintenance fee: An annual charge for having the line of credit available. Charged regardless of whether or not the line is used.

Annual percentage rate (APR): The cost of credit on a yearly basis expressed as a percentage.

Application fee: Fees that are paid upon application. May include charges for property appraisal and a credit report.

Balloon payment: A lump-sum payment that may be required when the plan ends.

Cap: A limit on how much the variable interest rate may increase during the life of the plan.

Closing Costs: Fees paid at closing, including attorney fees, fees for preparing and filing a mortgage, fees for title search, taxes, and insurance.

Credit limit: The maximum amount that may be borrowed under the home equity plan.

Equity: The difference between the fair market value (appraised value) of the home and the outstanding mortgage balance.

Index: Published rate that serves as a base for the interest rate charged on a home equity line and also as the base for rate changes used by the lender.

Interest rate: The periodic charge, expressed as a percentage, for use of credit.

Margin: The number of percentage points the lender adds to the index rate to determine the annual percentage rate.

Minimum payment: The minimum amount that you must pay (usually monthly) on your account. Under some plans, the minimum payment may cover interest only; under others, it may include both principal and interest.

Points: One point is equal to 1 percent of the amount of the credit line. Points must usually be paid at closing and are in addition to monthly interest.

Security interest: An interest that a lender takes in the borrower’s property to ensure repayment of a debt.

Transaction fee: A fee charged each time you draw on your credit limit.

Variable rate: An interest rate that changes periodically in relation to an index. Payments may increase or decrease accordingly.