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Interest Only/20 Year Term/Floor/Prime (with optional Auto-deduct - Intro Rate/Prime less 1%)

This disclosure contains important information about our Home Equity Line of Credit. You should read it carefully and keep a copy for your records.                                                 

In this disclosure statement, the words “we”, “us”, or the “Bank” refers to East Cambridge Savings Bank and “you” refers to the Borrower. “Line” refers to a Home Equity Line of Credit.

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 of the change, not to enter into an agreement with us, you are entitled to a refund of any fees you paid to us or anyone else in connection with your application.

Security Interest: We will take a mortgage on your home. You could lose your home if you do not meet the obligations in your agreement with us.

Possible Action: We can terminate your Line, require you to pay us the entire outstanding balance plus interest in one payment, and charge you certain fees if:

1. You engage in fraud or material misrepresentation in connection with the Line.
2. You do not meet the repayment terms.
3. 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:

1. The value of the dwelling securing the line declines significantly below its appraised value for the purposes of the Line.
2. We reasonably believe you will not be able to meet the repayment requirements due to a material change in your financial condition.
3. You are in default of a material obligation in the agreement.
4. Government action prevents us from imposing the ANNUAL PERCENTAGE RATE provided for or impairs our security interest such that the value of the interest is less than 120% of the Line.
5. A regulatory agency has notified us that continued advances would constitute an unsafe and unsound practice.
6. The maximum ANNUAL PERCENTAGE RATE is reached.

The agreement permits us to make changes to the terms of the agreement at specified times or upon the occurrence of specified events.

Minimum Payment Requirements: You can obtain advances of credit for 10 years (the “Draw Period”). During the Draw Period, payments will be due monthly. Your minimum monthly payment will equal the finance charges that have accrued on the outstanding balance. After the Draw Period ends, you will no longer be able to obtain credit advances and must pay the outstanding balance over 10 years (the “Repayment Period”). During the Repayment Period, payments will be due monthly. Your minimum monthly payment will equal 1/120th of the balance that was outstanding at the end of the Draw Period plus the finance charges that have accrued on the outstanding balance.

Minimum Payment Examples:  If you made only the minimum monthly payments and took no other credit advances, it would take 20 years to pay off a credit advance of $10,000. If you have your payments automatically deducted from a checking or savings account at the Bank (“Auto-deduct”) (i) during the Draw Period, at an ANNUAL PERCENTAGE RATE of 3.990% until December 1, 2009 and thereafter at an ANNUAL PERCENTAGE RATE of 4.250%, you would make 120 monthly interest-only payments varying between $32.79 (payment 1 through December 1, 2009) and $34.93 (thereafter through payment 120 at the end of the Draw Period); followed during the Repayment Period, at an ANNUAL PERCENTAGE RATE of 4.25%, by 120 monthly payments varying between $118.26 (payment 121) and $83.62 (payment 240). If you do not have Auto-deduct, during the Draw Period at an ANNUAL PERCENTAGE RATE of 4.250% you would make 120 monthly interest-only payments of $34.93, followed during the Repayment Period by 120 payments varying between $118.26 (payment 121) and $83.62 (payment 240).

Fees and Charges: To open and maintain a Line, you must pay us the following fees: Application Fee – None; Points – None; Annual Servicing/Processing Fee: $50.00 (due on each anniversary of Line). You must also pay certain fees to third parties to open a Line. These fees generally total between $500.00 and $1,000.00 (“Closing Costs”). If you ask, we will give you an itemization of the fees you will have to pay to third parties.

In addition, you must maintain homeowner’s insurance on your property equal to at least the total of your first mortgage plus your maximum Line. As is required by Massachusetts law, the Bank will accept insurance less than this total, provided coverage is 100% Replacement Cost Insurance. This insurance is not available through the Bank and may be obtained through any agency acceptable to the Bank.

Prepayment Penalty: A prepayment penalty equal to the amount of the Closing Costs we paid will be due if the Line is paid off within 2 years of the Note Date.

Tax Deductibility: You should consult a tax advisor regarding the deductibility of interest and charges for the Line.

Variable Rate Information: If you do not have Auto-deduct, your interest rate will be equal to the Prime Rate (as defined below) plus zero percent (0.00%) per annum for the life of the loan. If you have Auto-deduct, a special Introductory 3.99% ANNUAL PERCENTAGE RATE may be guaranteed until December 1, 2009 and thereafter your interest rate will be equal to the Prime Rate minus one percent (1.00%) per annum for the life of the loan. 

If you have Auto-deduct, the initial annual percentage rate is “discounted” – it is not based on the index and margin used for later rate adjustments. The initial rate will be in effect until December 1, 2009.

Ask us for the current index value, margin and ANNUAL PERCENTAGE RATE. After you open a Line, rate information will be provided on periodic statements that we will send you.

Rate Changes: The ANNUAL PERCENTAGE RATE can change each month. The Maximum ANNUAL PERCENTAGE RATE (cap) that can apply is 18%. The minimum ANNUAL PERCENTAGE RATE (floor) is 4.250%, except that if you have Auto-Deduct, then the floor is 3.99% until December 1, 2009. Except for this “cap” and “floor”, there is no limit on the amount by which the rate can change during any one-year period.

Maximum Rate and Payment Examples: If you had an outstanding balance of $10,000 during the Draw Period, the minimum monthly interest only-payment at the maximum ANNUAL PERCENTAGE RATE of 18% would be $147.95. This ANNUAL PERCENTAGE RATE could be reached during the first month of the Draw Period or, if you have Auto-Deduct, on December 2, 2009. If you had an outstanding balance of $10,000 at the beginning of the Repayment Period, the minimum monthly payment at the maximum ANNUAL PERCENTAGE RATE of 18% would be $231.28. This ANNUAL PERCENTAGE RATE could be reached during the first month of the Repayment Period.

Historical Examples: The following table shows how the ANNUAL PERCENTAGE RATE and the minimum monthly payments for a single, $10,000 credit advance would have changed based on changes in the Index over the past 20 years. The index values are from June of each year. While one payment amount per year is shown, payments would have varied during each year. The table assumes that no additional credit advances were taken, that only the minimum payments were made each month, and that the rate remained constant during each year. It does not necessarily indicate how the index or your payments will change in the future. Payments shown reflect the interest-only payments during the Draw Period and principal and interest payments during the Repayment Period. The table also assumes a 30-day billing cycle with interest computed on a 365-day basis.

HISTORICAL EXAMPLE

Arlington • Belmont • Cambridge • Medford • Somerville • Waltham