Home Equity Line Of Credit - Options For Rising Interest Rates

Home Equity Line Of Credit - Options For Rising Interest Rates

If you're among the hundreds of thousands of homeowners who have taken out a home equity line of credit in the last couple of years, you've seen your interest rate jump dramatically. What started out as a $150 payment on your credit line two years ago

is now over $300. That's a serious increase. So, what are your options?

1. Refinance into a home equity loan.

This has become an extremely popular option as of late. Statistics bear this out, with about 7 in 10 second mortgages being home equity loans. You can take out a fixed rate second mortgage and pay off the line of credit.

The downside is much higher payments since a home equity loan requires a principal and interest payment. On a $25,000 loan you could be looking at an increase of $75 a month in payments over the interest only line of credit payment.

2. Stay put and do nothing.

There are several reasons why this option is popular with borrowers. First, many folks just don't want to take the time to look for a better option. This may not be a bad option only if interest rates increases are finished. But, who has a reliable crystal ball?

The other group of people in this category want to keep their hom

e equity line of credit because of the flexibility. They can continue to make interest only payments and pay more later when funds become available. They like the idea of being able to pay down their credit line and take it back out again without having to go through the loan process all over.

3. The cash out refi option.

Simply put, this is where you would cash out refinance your first mortgage. So, if you have a $150,000 mortgage and a line of credit at $25,000. You'd get a new mortgage for $175,000 and take the extra $25,000 and pay off the line of credit. This option can work well even with higher 30 year fixed mortgage rates, but you have to watch out for fees and your loan to value ratio.

These are just three of your best options in battling a high intere4st home equity line of credit. Carefully consider all of your different options and make the choice that best fits your needs.

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To learn more about a Home Equity Line Of Credit as well as more information on everything to do with home equity loans, visit us at www.HomeEquityLoansA-z.com

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