Resolving home equity line issues
Many homeowners took out a home equity line of credit (HELOC) prior to the downturn of 2007. A large number of those loans offered interest-only payments for up to 10 years, and are reaching a point at which they will re-set and begin to amortize. Most products require a 10- to 15-year payoff term, which can dramatically increase the monthly payment compared to the interest-only payments that borrowers were making before. Here, Mark Wells at Preferred Financial Services answers questions and offers solutions for those facing this issue.
How do I know when my HELOC will re-set?
There is no standard product when it comes to HELOCs, so you will have to look at your original Note to see if you are reaching the end of your interest-only payment option. If you don’t have a copy of the original note, you can look it up in the online public records. (Greenville County website is www.GreenvilleCounty.org, Spartanburg is www.SpartanburgCounty.org, etc.) Under the “Public Record/Real Estate” tab, type in your last name and first initial, and search under “all” records to find it.
Will my bank just give me a new HELOC with a new interest-only term?
In some cases, they may do this. However, many banks no longer offer an interest-only payment option, or restrict it to the first year of the new loan.
What else can I do?
If you have enough equity in your home, it may be worth refinancing your current first mortgage and including the equity line (HELOC) in the pay-off. This would give you a fixed rate going forward, and give you the best repayment terms for all money owed on the house.
How much equity do I need to be able to do this?
Conventional loan programs allow you to refinance your first and second mortgages up to 80 percent of the current value of your home. To see if this might work in your case, add your current first-mortgage balance to your second-mortgage balance and divide this number by 0.8. If the resulting number is less than what you think your house is worth, then you should be able to use this solution. If you are a Veteran, VA loans allow you to do this up to 100 percent of the value of your home. If you are not a veteran and need to consolidate the first and second mortgages, FHA allows you to do this up to 97 percent of the value of your home, as long as you have not taken a draw of more than $2,000 on your HELOC in the past 12 months. Jumbo loan programs generally allow for consolidation of the first mortgage and HELOC, up to 80 percent of the value of the house.
I welcome questions and comments and can assist you in finding your note online and providing a refinance scenario to help you determine the best route to take. I can be reached at 864-235-9596 or via email at Mark@TheGreatestRates.com.
Or Text Me Now! 864-430-4856
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