If you are in the market for credit, a home equity plan may be right for you. Or perhaps another form of credit would be better. Before making a decision, 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 risk. And remember, failure to repay the amounts you've borrowed, plus interest, could mean the loss of your home.

With a home equity line, you will be approved for a specific amount of credit--your credit limit, the maximum amount you may borrow at any one time under the plan. Many lenders set the credit limit on a home equity line by taking a percentage (say, 75 percent) of the home's appraised value and subtracting from that the balance owed on the existing mortgage. For example:

In determining your actual credit limit, the lender will also consider your ability to repay, 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 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) and to keep a minimum amount outstanding. Some plans may also require that you take an initial advance when the line is set up.

Lenders sometimes offer a temporarily discounted interest rate for home equity lines--a rate that is unusually low and may last for only an introductory 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 interest rates drop.

Some lenders allow you to convert from a variable interest rate to a fixed rate during the life of the plan, or to convert all or a portion of your line to a fixed-term installment loan.

Plans generally permit the lender to freeze or reduce your credit line under certain circumstances. For example, some variable-rate plans may not allow you to draw additional funds during a period in which the interest rate reaches the cap.

     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)
     Closing costs, including fees for attorneys, title search, and 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. 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.

Regardless of the minimum required payment, 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 percent interest rate, your monthly payments would be $83. If the rate rises over time to 15 percent, 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.

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.

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.

State Banks that Are Members of the Federal Reserve System
Division of Consumer and Community Affairs
Mail Stop 801
Federal Reserve Board
Washington DC 20551
(202) 452-3693
www.federalreserve.gov

National Banks
Office of the Comptroller of the Currency
Customer Assistance Unit
1301 McKinney St.
Suite 3710
Houston, TX 77010
(800) 613-6743
www.occ.treas.gov

Federal Credit Unions
National Credit Union Administration
Office of Public and Congressional Affairs
1775 Duke St.
Alexandria, VA 22314
(703) 518-6330
www.ncua.gov

Federally Insured Non-Member State-Chartered Banks and Savings Banks
Federal Deposit Insurance Corporation
Office of Compliance and Consumer Affairs
550 17th Street, NW
Room PA-1730, 7th Floor
Washington, DC 20429
(202) 942-3100 or
(800) 934-FDIC
www.fdic.gov

Federally Insured Savings and Loan Institutions and Federally Chartered Savings Banks
Office of Thrift Supervision Consumer Programs
1700 G Street, NW, 6thFloor
Washington, DC 20552
(202) 906-6237 or
(800) 842-6929
www.ots.treas.gov

Mortgage Companies and Other Lenders
Federal Trade Commission
Consumer Response Center
600 Pennsylvania Avenue, NW
Washington, DC 20580
(202) 326-3758 or
(877) FTC-HELP
www.ftc.gov

1. AVAILABILITY OF TERMS. All of the terms described below are subject to change. 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 that you have paid to us or anyone else in connection with your application. We offer a variety of plans with different rates and terms. We will provide you a number of samples.

2. SECURITY INTEREST. We will take a security in your home.
You could lose your home if you do not meet the obligations in your agreement with us.

3. POSSIBLE ACTIONS. Under certain circumstances, we can:

A. Terminate your line of credit, require you to pay      us the entire outstanding balance in one
     payment, and charge you certain fees;
B. Refuse to make additional extensions
     of credit; and
C. Reduce your credit limit.

We can terminate your line of credit, require you to pay
us the entire outstanding balance in one payment, and
charge you certain fees if:

A. You engage in fraud or material
     misrepresentation in connection with
     the line of credit;
B. You fail to make a payment as required
     by the agreement; or
C. 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:

A. The value of the dwelling securing the
     line of credit declines significantly below
     its appraised value for purposes of the
     line of credit;
B. We reasonably believe you will not be able to
     meet the repayment requirements under the
     line of credit due to a material change in your
     financial circumstances ;
C. You are in default of a material obligation of
     the agreement, which shall include, but is not
     limited to, your ongoing obligation to supply us
     with information we feel we need to assess
     your financial condition;
D. Government action prevents us from imposing
     the annual percentage rate provided for in the
     agreement, or impairs our security interest
     such that the value of the interest is less than
     120% of the credit limit on the line of credit;
E. A regulatory agency has notified us that
     continued advances would constitute an
     unsafe and unsound practice; or
F. The maximum annual percentage
     rate is reached.

4. PLAN LENGTHS. We offer plans whereby you can get advances for:

• 60 months (if your loan to value ratio is over 89.9%) and
• 120 months (if your loan to value ratio is 89.9% or less).

5. RENEWAL OR REFINANCE OF LINE. After the Draw Period ends, you will no longer be able to obtain credit advances. If we determine that you continue to meet our current credit criteria and collateral valuation, at our discretion, we may extend the Draw Period for one or more additional Draw Periods or we may refinance your Line on the terms we are then offering for Home Equity Lines of Credit. Otherwise, if your Line is not renewed for an additional Draw Period or your Line is not refinanced, you must repay the outstanding balance on your Line at maturity. We are not obligated to refinance your loan at this time. You may also request that we refinance or renew your Line.

6. MINIMUM PAYMENT REQUIREMENTS. We have three
different payment options available. During the period that
you can draw on your line of credit (whether 60 months or
120 months) payments will be due monthly. Your minimum
monthly payment options are as follows:

PAYMENT PLAN 1: The minimum payment is 1.5% of
your loan account balance at the end of the billing cycle,
or $75.00, whichever is greater.

• MINIMUM PAYMENT EXAMPLE FOR 2% MARGIN, 120 MONTH DRAW: If you made only the minimum monthly payment and took no other credit advances, it would take 10 years to pay off a credit advance of $10,000.00 at an ANNUAL PERCENTAGE RATE of 10.250%. During that period, you would make 119 payments varying between $151.28 and $75.00, with a final payment of $4,555.73.
      (Initial discount: If the plan had an initial rate of 2.99%,
       representing a discount of 4.010%, for 3 months, which
       is a discount we have offered in the 6 months before the
       preparation of this disclosure, your payments would be
       the same except the final payment would be slightly less
       than $4,555.73)
• MINIMUM PAYMENT EXAMPLE FOR 2.75% MARGIN, 60 MONTH DRAW: If you made only the minimum monthly payment and took no other credit advances, it would take 5 years to pay off a credit advance of $10,000.00 at an ANNUAL PERCENTAGE RATE of 11 .000%. During that period, you would make 59 payments varying between $151.38 and $106.96, with a final payment of $7,087.79.
      (Initial discount: If the plan had an initial rate of 2.99%,
       representing a discount of 6.010%, for 3 months, which
       is a discount we have offered in the 6 months before the
       preparation of this disclosure, your payments would be
       the same except the final payment would be slightly less
       than $7,087.79.)

• MINIMUM PAYMENT EXAMPLE FOR 2% MARGIN, 120 MONTH DRAW: If you made only the minimum monthly payment and took no other credit advances, it would take 10 years to pay off a credit advance of $10,000.00 at an ANNUAL PERCENTAGE RATE of 10.250%. During that period, you would make 119 payments of $85.42, with a final payment of $10,085.42.
      (Initial discount: If the plan had an initial rate of 2.99%,
       representing a discount of 4.010%, for 3 months, which
       is a discount we have offered in the 6 months before the
       preparation of this disclosure, your payments for the first
       3 months would be $24.92 and the rest of the payments
       and the final payment would be as shown above.)
• MINIMUM PAYMENT EXAMPLE FOR 2.75% MARGIN, 60 MONTH DRAW: If you made only the minimum monthly payment and took no other credit advances, it would take 5 years to pay off a credit advance of $10,000.00 at an ANNUAL PERCENTAGE RATE of 11.000%. During that period, you would make 59 payments of $91.67, with a final payment of $10,091.67.
      (Initial dis count: If the plan had an initial rate of 2.99%,
       representing a discount of 6.010%, for 3 months, which
       is a discount we have offered in the 6 months before the
       preparation of this disclosure, your payments for the first
       3 months would be $24.92 and the res t of the payments
       and the final payment would be as shown above.)

• MINIMUM PAYMENT EXAMPLE FOR 2% MARGIN, 120 MONTH DRAW: If you made only the minimum monthly payment and took no other credit advances, it would take 10 years to pay off a credit advance of $10,000.00 at an ANNUAL PERCENTAGE RATE of 10.250%. During that period, you would make 119 payments of $85.42, with a final payment of $10,085.42.
• MINIMUM PAYMENT EXAMPLE FOR 2.75% MARGIN, 60 MONTH DRAW: If you made only the minimum monthly payment and took no other credit advances, it would take 5 years to pay off a credit advance of $10,000.00 at an ANNUAL PERCENTAGE RATE of 11.000%. During that period, you would make 59 payments of $91.67, with a final payment of $10,091.67.

In all payment plans, the minimum payment amount will be rounded to the nearest $.01. The minimum monthly payments may not be sufficient to fully repay the principal that is outstanding on your line of credit at the end of 60 or 120 months term. If they are not, you will then be required to pay the entire balance in a single payment.

• FIXED RATE LOCK OPTION: This Agreement includes a Fixed Rate Lock Option that is subject to the following terms:
• Lock Balance. You may exercise the Lock Option against any amount of the Loan Account Balance.
• Lock Period. You may exercise the Lock Option at any time during the Draw Period on your Transaction Account.
• Lock Number. You may have outstanding no more than five Locks on your line of credit at a time. Each Lock created will be a minimum of $2,500.00, but cannot exceed the available credit under your line of credit.
• Lock Term. The Lock term may not exceed the remaining number of months in the Draw Period on your Transaction Account.
• Lock Repayment Method. Payments on a Lock will be fully amortized over the Lock term. The amounts you pay will be applied first to the variable rate portion of your Transaction Account, then to the fixed rate portion. Such payments shall be applied to interest, fees, (other than late fees), insurance, principal, and late fees, in the preceding order or in any other order at our discretion.
• Lock Fees. Your Transaction Account will be assessed a $50 Lock fee each time you exercise a Lock Option.
• Fixed Rate Determination. The fixed rate applicable to a Lock will be determined by the 3-year Treasury Note Index (for terms up to 59 months) or by the 5-year Treasury Note Index (for terms 60 months or greater) in effect as of the first business day in the month you exercise the Lock Option plus a margin. The Lock Option will not include any promotional rate applicable to the Transaction Account.
• Additional Lock Rules. You must have an existing Loan Account Balance in order to exercise the Lock Option. You may not exercise the Lock Option if your Transaction Account is delinquent. You may not make additional advances to the Lock balance once it is established. Payments on a Lock will be fully amortized over the Lock term and added to the regular Minimum Payment on your line of credit. Additional payments to a Lock may be made at any time, but shall not affect your obligation to pay succeeding Lock payments as long as any amount is still owing on the Lock. As you make payments on a Lock, the available credit under the variable rate portion of the line of credit will replenish up to the payments you make.

7. FEES AND CHARGES. To open and maintain a line of credit, you may have to pay the following fees to us:

Termination Fee: For residents of Ohio, we will charge a Termination Fee if you terminate your account within three
(3) years from the date of the agreement.

Appraisal: $100 - $280
Credit Report: $1.00
Mortgage Release: $28 - $32

AVM: $4 - $61
FACT Fee: $64 - $154
Mortgage Filing Fee: $ 10

Recording Fee: $52.00
Flood Determination: $7.50
Full Property Report: $45 - $50

8. REFUNDABILITY OF FEES. If you decide not to enter into this plan within three days of receiving this disclosure and the Home Equity Booklet, you are entitled to a refund of any fee you may have already paid.

9. LIMITATIONS ON ADVANCES OF CREDIT.
You are limited to obtaining

• no more than $700.00 per day in withdrawals
  at ATM machines with your VISA, Card,
• no more than $7,500.00 per day using your
  VISA card for point of sale transactions, and
• no more than 12 extensions of credit per day
  by using your VISA card.

10. TAX DEDUCTIBILITY. You should consult a tax
advisor regarding the deductibility of interest and
charges for the line of credit.

11. VARIABLE RATE FEATURES. This line of credit 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 not other costs. The annual percentage rate is based on the value of an index. The index is the base rate on corporate loans posted by at least 75% of the nation' s 30 largest banks known as the Wall Street Journal Prime Rate and is published in the Wall Street Journal. To determine the annual percentage rate that will apply to your line of credit, 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 line of credit, rate information will be provided on periodic statements that we send you.

12. RATE CHANGES. The annual percentage rate can change daily. There is no limit on the amount by which the rate can change in any one year period. The maximum ANNUAL PERCENTAGE RATE that can apply during the line of credit is 25.000% for customers whose property is located in Ohio and 22.2% for customers whose property is located in Pennsylvania.

13. MAXIMUM RATE AND PAYMENT EXAMPLES.

• OHIO TRANSACTIONS: If you had an outstanding balance of $10,000.00 the minimum monthly payment at the maximum ANNUAL PERCENTAGE RATE of 25.000% would be $208.33 for payment plans 2 and 3 and $153.12 for payment plan 1. The maximum annual percentage rate could be reached in the 1st month (or the fourth month if there is an initial discounted rate in effect for the first three months).
• PENNSYLVANIA TRANSACTIONS: If you had an outstanding balance of $10,000.00 the minimum monthly payment at the maximum ANNUAL PERCENTAGE RATE of 22.2% would be $185.00 for payment plans 2 and 3 and $152.78 for payment plan 1. The maximum annual percentage rate could be reached in the 1st month (or the fourth month if there is an initial discounted rate in effect for the first three months).

14. Historical examples

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