Published On: Mon, Aug 18th, 2014

Looming Home Equity Resets On the Horizon

Josh Carlson

By Joshua A. Carlson

Customers with home equity lines of credit (HELOCs) are expected to see their payments rise in the coming years. Homeowners who are planning to take out an equity release loan are advised to estimate the cost using an equity calculator. Nearly 8 million customers had lines of credit which have a 10-year draw period, allowing borrowers to tap into their credit and pay only the interest on the loan during the draw period. Many of these loans have draw periods which end at the beginning of next year, and they have to begin paying both interest and principal on the outstanding balances. According to the TransUnion study more than half of the loans have balances of $100,000 or more.

Will this mean more short sales and foreclosures? It all depends on the banks positioning. If the banks are cooperative with homeowners and work a plan with them, then NO, I do not think will this be that big of a deal. But if they are not, BEWARE. There will be more foreclosures and short sales on the market and potentially a decrease in the value of your home. If you have an outstanding balance that is planning to come due, try to negotiate with the bank to get a reduction. Or sell your home and try to avoid the foreclosure process.

The banks are banking on the unemployment rate, which has decreased. And as Home Values have risen, consumers have a better exit strategy. Could this be the pin prick that pops the miniature Bubble? You don’t want to be the homeowner sitting there like a deer in the headlights if it is. Be prepared and check your HELOC terms and when your draw period ends as it is better to be proactive than be caught off guard. If you are confused about what your documents say and what to do next, there are real estate professionals out there to help you out.

Stay tuned for more tips and important information regarding your Home: Inside and Out…

 

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