Which loan functions as a line of credit tied to a property, allowing borrowing up to a set limit and increasing the loan balance as needed?

• A. Open end loan
• B. Buy downs
• C. Reverse mortgage
• D. Graduate payment mortgage

Answer: (A)

A revolving line of credit secured by a property is designed to let you borrow up to a fixed limit and have the loan balance grow as you draw funds, then shrink as you repay. That ongoing ability to borrow, repay, and borrow again up to the same limit is the hallmark of an open-end loan, commonly seen as a home equity line of credit (HELOC) when tied to real estate. Interest accrues on whatever balance you currently owe, and you don’t need a new loan each time you want more funds.

Buy downs involve paying points upfront to reduce the interest rate on a loan, not a revolving credit facility. A graduate payment mortgage features payments that start low and increase over time, which is about payment shaping rather than borrowing against a line. A reverse mortgage provides funds against home equity but isn’t described as a revolving line of credit by default, and its structure differs from the standard open-end line of credit concept.