A loan based on the current market value of a home that is less than the amount remaining on the mortgage is called a...

A loan based on the current market value of a home that is less than the amount remaining on the mortgage is called a...

• A. Liquidity
• B. Home Equity Loan
• C. Credit Bureau
• D. Premium

Answer: (B)

This is about a loan that is secured by the homeowner’s equity in the property—the portion of the home's value that you actually own after paying the mortgage. A home equity loan uses the value of the home (minus the outstanding mortgage) as collateral, so the lender bases the loan amount on that equity. If the market value is less than the mortgage balance, you have negative equity, which in practice makes obtaining a home equity loan unlikely, but the concept described by the term still fits the idea of borrowing against the home’s value and the owner's equity. The other options don’t describe a loan tied to home value or ownership stake: liquidity refers to cash availability, a credit bureau is a credit history source, and a premium is a cost associated with an insurance policy.

This is about a loan that is secured by the homeowner’s equity in the property—the portion of the home's value that you actually own after paying the mortgage. A home equity loan uses the value of the home (minus the outstanding mortgage) as collateral, so the lender bases the loan amount on that equity. If the market value is less than the mortgage balance, you have negative equity, which in practice makes obtaining a home equity loan unlikely, but the concept described by the term still fits the idea of borrowing against the home’s value and the owner's equity.

The other options don’t describe a loan tied to home value or ownership stake: liquidity refers to cash availability, a credit bureau is a credit history source, and a premium is a cost associated with an insurance policy.