Refinancing Your Home Equity Line of Credit

Bills.com Team
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Highlights


  • There are many reasons to refinance a HELOC.
  • Make sure that you understand the pay off requirements of your HELOC.
  • Shop around and compare fees and true lifetime cost of any loan before refinancing.
4.5
/5.0
(6 Votes)

Refinancing Your Home Equity Line of Credit

These days, borrowers use Home Equity Lines of Credit (HELOCs) to assist with all sorts of expenses, given the flexible nature of this home loan product. Some of the most popular reasons for taking out a HELOC are college tuition, medical expenses, home remodeling, medical bills and debt consolidation. Because the interest is tax-deductible, a Home Equity Lines of Credit can be a very attractive option when you need to borrow money, or to just have there for peace of mind and for financial security. You may also take out a HELOC at the same time that you secure your first mortgage when buying a home in order to finance a greater percentage of what the home is worth without the need for mortgage insurance.

If you are seeking lenders to help you refinance your HELOC, you can always apply with our pre-screened refinance lenders to see if there is a loan product that meets your needs.

Whatever the circumstances were when you took out your Home Equity Lines of Credit, the time may come when you decide to refinance your HELOC or refinance a home equity loan. Make sure you have clear goals as to why you are refinancing, and be certain those goals can be met by the program you choose.  Typically, people look to refinance a HELOC to lower the rate, but sometimes getting a larger line of credit or even extinguishing the loan all together can be motivations to refinance. Some Home Equity Lines of Credit come with a lump-sum balloon payment that is required at some specified time. Refinancing to avoid having to come up with the lump-sum is another reason to refinance.

One reason to refinance a HELOC, and the first one that comes to most people’s minds, is the interest rate. This may or may not be a good reason depending on a few factors. Your HELOC carries an adjustable rate; therefore if rates go down, so should your payment amount. If rates are steadily rising, however, and especially if they’re expected to continue to rise, refinancing your HELOC back into your first mortgage, or into a closed-end second mortgage with a fixed rate, might make the most sense.

If you originally took out your HELOC for a project or expense such as college tuition or home remodeling and that project is now completed, you may just be looking to refinance your first mortgage and your HELOC into one loan with a low fixed rate to avoid the potential for a rising rate and increasing payments in the future. Having a single loan with a fixed rate offers you the satisfaction of knowing that your payment amount will never go up.

Conversely, if you’ve come to the conclusion that you need to be able to draw more from your Home Equity Lines of Credit than you’d first thought, you can refinance it or, more correctly speaking, take out a new HELOC for a greater value. Keep in mind that you’ll have to pay additional closing costs, and that unless you can start making much larger payments, it will take you longer to pay back the larger Home Equity Lines of Credit amount. You should carefully consider your needs and options before opting for a HELOC with a larger credit line.

When the time comes to refinance your HELOC, don’t hesitate to consult with a financial planner or a loan officer. These professionals can advise you on whether your reasoning is financially sound and about the kind of program you should choose to meet the needs and goals you’re setting for yourself.

4.5
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  • 35x35
    Mar, 2013
    Kathy
    I currently own my home with my ex-husband. I live in it and it will be titled in my name when the mortgage is paid per our divorce agreement. My ex is responsible for paying off the mortgage. The home is currently worth $450.000. We owe ~$80.000.00 on the primary mortgage scheduled to be paid off in 7 years. We also owe $80,000.00 on a HELOC. He wants to refinance and eliminate the HELOC but I would have to get a loan for my half or $40,000. What are my options? I work part time earning $14,000/year plus $30,000 in child support. I am married again but my husbands credit is horrible so this would need to be in just my name. My credit score is 760. Help!
    0 Votes

    • 35x35
      Mar, 2013
      Bill
      No doubt you are familiar with the old saying, "The devil is in the details." Consult with a mortgage lender to learn if you qualify for a home loan. At first glance, the first question I would have is the duration of the child support. My second question would be to learn your debt-to-income ratio. A $44,000 income and 760 credit score are great starts, but what about your debt?
      0 Votes

  • 35x35
    Feb, 2013
    Don
    Question re: refinancing HELOC. Obtained HELOC in 2003 for $212,000. At the time, property was valued at $250,000. No existing mortgage, already paid up previously. 10 yr draw period will end later this year, at which time 20 yr repayment period will begin. Currently, balance is $120,000. I wish to refinance HELOC with same bank, and have been approved for credit line of $160,000, based on the interim decline in value of the property. The bank requires that the original loan be paid off in full when new HELOC is activated. Furthermore, the funds from this payoff will be drawn directly from the new credit line. Thus, the new credit line will be immediately reduced by $120,000 in order to re-finance the first HELOC. This will leave me with considerably lower credit line than I was approved for. I was expecting that the original HELOC would remain open, and just continue into the repayment period, while the new line would be available as well, for the approved $160,000. However, bank tells me I cannot have two open HELOCs on the same property, therefore the first HELOC needs to be closed, AND the funds must come from the new line. Does this sound correct?
    0 Votes

    • 35x35
      Feb, 2013
      Bill
      I understand that you had a HELOC for $212,000 of which you owe $120,000. Your bank approved a refinance of your current HELOC for $160,000. If that is the case, then yes it is natural that you would not have two HELOCs, rather the new one would be used to pay off the old HELOC. THat means the first $120,000 would be used to pay off the old HELOC and the remainder would be available as a line of credit.

      Are you sure that you want to keep all of this as a line of credit? Maybe you should be looking to mix a traditional mortgage together with the HELOC, so that you can build up equity in your home.
      0 Votes

    • 35x35
      Feb, 2013
      Don
      I took out a traditional 30 year mortgage when I originally acquired the property, and this was paid up in full several years ago. I have ongoing additional expenditures that I will need to make, and planned to use HELOC for to cover those. Unfortunately, with the reduced credit line remaining after the payoff of original loan, a refinanced HELOC will not be adequate for my needs.
      0 Votes

  • 35x35
    Oct, 2012
    Melissa
    So, I feel as though I have been hit to the stomach. I have some questions. But first, here are the facts. We are in our home 7 years, and when we had it built, we, like many others, were told to do a piggy back loan, we did. We had our first mortgage of approximately 340K and a HELOC for 75K. About 2 years later when rates dropped, we refinanced with Teachers Federal Credit Union at a rate of 4.5, and redid our HELOC with citibank at prime minus 1.01. Well, now rates have dropped again, and we have paid virtually nothing down on the HELOC, so we went to another credit union that locked us in at a rate of 3.5, and was lumping together our first mortgage with Teachers and our HELOC with Citibnak, giving us a total mortgage with them of about 412K (with closing costs). To have that new refinance go through, with the HELOC paid off, we needed our home value to come in at 550K to have a 75% debt to value ratio. Well, it didn't come in at 550K, it came in at 500K. While it is great that we are not underwater on the house, I am sick because I am now stressing about this 75K HELOC with the prime rate. In 5 years, the prime rate could be 5%, and now my minimum payments are through the roof! My question is, what are my options? Can i refinance the 340K with this new credit union and then refinance the 75K HELOC to a lockled rate? DOes that even exist for a HELOC? For this new credit union to close on the refinance, I would need to bring tens of thousands of dollars or more to closing because it is over 75%, and that is not feasible. I don't know what to do. Mostly, because I do now know what options I have. Please help!
    0 Votes

    • 35x35
      Oct, 2012
      Bill
      I understand you have two loans:
      1. First Mortgage of $340k with Teachers Credit Union
      2. Second Mortgage (HELOC) of $75K with Citibank.

      Your options are rather limited due to the home's current value. It is unlikely that the new credit union will agree to refinance the first loan, because the CLTV (Combined Loan to Value ratio) will be too high. In addition you will need the approval of Citibank to subordinate their mortgage.

      It seems as if the HELOC is your major problem. Besides the interest rate risk, you are also left with the possibility that you are not paying off the loan. I suggest that you speak to Citibank to see if you can switch your HELOC into a fixed-rate amortized loan. Even if your interest rate will be higher than today's low variable rate, you will have peace of mind that your loan will be paid off. Your second step is to follow home prices and see if refinancing will be feasible in the future.

      0 Votes

  • 35x35
    Sep, 2012
    Eddie
    My questions are concerning re-financing my HELOC into my first mortgage. I have no idea why we ended up with this "piggy-back loan" to begin with (other than the lender was a slime ball!!). I wanted to do an FHA loan, but for whatever reason they did a conventional and a HELOC. My husband and I have beyond excellent credit with scores in the 800s and absolutely NO credit card debt and only small loans on 2 vehicles (both under $10k with monthly payments around $200 for each interest rates around 3%). My husband makes roughly $125k a year gross and I make roughly $40k a year gross. We didn't want to have to make a huge downpayment, but we could have paid the 3.5% for FHA with cash no problem. They talked my husband into this HELOC crap and now I would like to refinance and either combine it with our first mortgage or at least make it a fixed rate mortgage at todays rates and refi the first mortgage at a lower rate. Personally, I just don't like making two payments a month and having these two huge debts over our heads. I'd rathe have one normal mortgage. Also I'm scared to death of when this HELOC comes due in 20 years... I know silly, but who knows what real estate will do in 20 years! Here are the numbers: the house originally cost us $189,500 in 2006. We currently owe $140,108 on the first fixed mortgage at 6.25% (this is why we want to refi this one to get a lower rate). We also owe $35,979 on the adjustable rate HELOC. So my questions are: 1) can we refi to a FHA loan? I can't figure out why not, but there has to be a reason they steered us away from that to begin with right. 2) the "online appraisal value" of our house is only about $165,000. This is completely inaccurate as we have replaced the water heater, have had professionally installed privacy fence, hot tub, granite counter tops, all new appliances through out and remodeled both bathrooms (paying cash for all of these items so we still have no other debts). Also all of the online appraisal tools have our house listed incorrectly as a 3 bedroom home with only 1785sq ft when it is definitely a 4 bedroom home and has roughly 1890 sq ft. (that is how it was appraised/listed, etc when we bought it. and really I can count I know we have 4 bedrooms and yes they all have closets). So by my calculations if we are able to refi our home would have to be worth roughly the $176,088 that we owe plus 3.5% either in increased equity or in cash (we could come up with the cash but I would rather use the equity if it exists to keep our cash liquid with us). Is this a correct assumption. I realize that we then need to come up with closing costs and need to watch out for points associated with the mortgage as well. So is anything I'm stating even possible or am I way off and we are just stuck with this stupid HELOC and a high rate on the 1st mortgage. I was thinking if nothing else would could at least refi the first fixed rate mortgage to a lower rate, right? Oh an my other question is how much typically does an appraisal cost and all of the closing costs that we are going to have to pay? Is it as much as our first closing costs because that was about $3,500 and that is totally acceptable to me, but much more than that and I'd have to weigh my options.
    0 Votes

    • 35x35
      Sep, 2012
      Bill
      It is not clear that why your lender pushed you away from the FHA loan. It is important when shopping for mortgages to get different offers and compare them. However, it is often difficult to compare offers due to the different types of payment schedules, interest rates and fees.

      In general you cannot refinance just a first mortgage. You need the cooperation of the second mortgage holder to subordinate their mortgage. If you first mortgage is a Fannie Mae or Freddie Mac loan - you can look it up on their sites - then you might be eligible for a HARP refinance loan. (This is an unlikely possibility, but worth looking into). However, even if this is the case, you can only refinance the first loan.

      You are correct, that an online appraisal report is not accurate and certainly not used by lenders. You might want to speak to realtors in the area about the value of your house. However, in the bottom line, only an appraisal report or lender automated valuation model will determine the "real" value of the house for the purpose of getting a home. The value of your house is critical in terms of refinancing.

      You can refinance using a FHA loan (with high upfront mortgage insurance premium fee and monthly insurance premiums). Still, interest rates are very low and you should save money by refinancing. Depending on your cash flow situation you might consider taking less than a 30-year loan. A 15-year loan would have principal and interest payments of only about $1237, but make sure you consider all of your housing expenses including the property insurance, property taxes and mortgage insurance.

      I suggest that you get offers for a FHA loan and then get pre-approved for a certain amount of money (your whole balance) based on an appraisal report. There is no one standard closing cost. Your lender fees will be influenced by the interest rates. Third party fees vary and are similar to a purchase mortgage loan. Your appraisal report should run about $350, but does vary.

      I recommend that you take advantage of Bills.com mortgage provider network and get a mortgage quote. Good luck!
      0 Votes

  • 35x35
    Apr, 2012
    Julie
    We bought our house at the height of the housing market and at the time were advised to do an interest only loan. We purchased the house for about $510,000. We've put an additional $115,000 into the home. We currently have a 7 year ARM that comes due in September for $408K and a HELOC for $103,000. Can we refinance our first mortgage for the $408K? We are terribly underwater on our property... we haven't had it appraised but even our tax records are saying it's now worth about $445K (obviously much less than what we owe). We are fine with our HELOC as we have a great rate but want to refinance our 7 year ARM so we get a fixed rate. A HELOC isn't a 2nd mortgage, is it? If our house gets appraised at $440K, will we need to pay down our HELOC or 1st mortgage?
    0 Votes

    • 35x35
      Apr, 2012
      Bill
      See the Bills.com article HARP 2.0 Mortgage Refinance Loan Program to learn if you are eligible for a refinance of your (presumably) upside-down first mortgage. A home equity line of credit is a gussied-up second mortgage. The HELOC lender will need to agree to resubordinate when you refinance, which should not be issue. The HELOC's resubordinating will not cause you to repay the loan. However, if it refuses to, which is unlikely but possible, you will face more difficult situation.
      0 Votes

  • 35x35
    Mar, 2012
    Tom
    Hello, The house value that we live in is about $300,000.00. We do not have mortgage. But, we do have two HELOC with Bank A; and Bank B. With Bank A, the balance is around $275,000.00; which is an interest only HELOC load (2.5%). With Bank B, the balance is around $175,000.00; which is a 20 years fix rate @4.99% HELOC loan. My question is that since we applied both HELOC 4 years ago, our financial situation has changed; our household annual income has reduced more than $50,000.00 (from $130,000.00 down to $80,000.00). In this case, is that possible for us to refinance that interest only HELOC ($275,000.00)? Any advices on this issue would be much appreciated.
    0 Votes

    • 35x35
      Mar, 2012
      Bill
      Since you are heavily underwater, it seems unlikely that you be able to do a refinance. (Are you eligible for the HARP mortgage). If you are having trouble making your payments, then any refinance or modification will only increase your payments, since you are currently paying only interest, at a very low rate. However, if that interest rate is too change, then speak with your lender about a loan modification.
      0 Votes

    • 35x35
      Mar, 2012
      Karen
      Do not recommend HARP loans for people with secondary financing. They will have to secure a subordination agreement and right now the government is not forcing secondary lenders to sign them. We found out the hard way and lost $365 in fees and that was money we really didn't have to lose. Citimortgage is our primary, PHH Mortgage is our secondary HELOC and they will not sign subordinations if your CLTV is greater than 80%. I have since done more research on this and found that most secondary lenders are NOT signing the subordination, only the big lenders that got a government bailout (i.e., CitiMortgage, Chase, BofA...) will sign and even that isn't 100% guaranteed!
      0 Votes

    • 35x35
      Mar, 2012
      Bonnie
      Applied for a refinance with a local bank on a 77,000 balance 1st mortgage with midland mortgage. Home appraised for 123,000. Found out we had with a second mortgage or HELOC with Regions for 28,000. Regions refused to subordinate. And now we are trying to find out if the HELOC can be increased to add an additional 5,000 or if we can refi with Regions. So far no call back or response from their loan officers. Thanks for this site and all the comments my eyes have really been opened !!!!!!!
      0 Votes

  • 35x35
    Mar, 2012
    Matthew
    I'm in a jumbo 30-year fixed interest-only (20-yr I-O period) loan. I recently was able to close-out the HELOC on the property, which I had been told was a barrier to having any chance of refi with a jumbo in today's market. So, first mortgage balance is at $640k with a 6.5% rate...current appraisal is hard to gauge - may have 10-15% equity, but 20% may be stretch. Are there viable options today for jumbo's with less than 20% equity that would bring my rate down?
    0 Votes

    • 35x35
      Mar, 2012
      Bill
      There are some private lenders that will go to 90% with a 645k loan amount, depending on your credit score and where the property is located.
      0 Votes

  • 35x35
    Feb, 2012
    Alex
    Good day...We have a first mortgage at $153,0000 and a second mortgage at $50,000. We recently tried to refinance both into one mortgage, but we now, like everyone else, lack the equity to do both. We ended up refinancing the first to 4% down from 6.5%, but our second is 13%. Is there anyway to refinance the second loan to a lower interest rate? If so, who do we contact or how do we go about this? Thank you for your assistance. Alex
    0 Votes

    • 35x35
      Feb, 2012
      Bill
      Alex, at the moment, the only way to get relief on your high-interest second loan, of which I am aware, is to try a loan modification with your lender. The second loan modification program through Making Homes Affordable, called 2MP is restricted to borrowers who modified their first mortgages through HAMP, I believe.

      If there is a program that comes out for people like you who are struggling with a second mortgage in an underwater home, Bills.com will surely report on it.
      0 Votes

    • 35x35
      Feb, 2012
      Alex
      Thank you very kindly for taking the time to respond to my inquiry...I greatly appreciate the attention. Regards, Alex
      0 Votes

  • 35x35
    Feb, 2012
    Jeanette
    My SIL refinanced her house 9 years ago. She now realizes that the "mortgage" is actually a variable rate HELOC. The ten year draw period will be done next year and she very much wants to get this into a standard 30 year mortgage. When she went to the bank to do a refi, the appraisal came back saying the house was worth exactly what she owed on the HELOC. The appraisal is probably accurate. She has excellent credit, stable job history, and is current on the HELOC payments (in fact, she's been paying p+i since she took out this loan.) She does not have enough cash to adjust the loan to equity ratios to 90% or less. Any suggestions? Thanks very much - excellent information on this site.
    0 Votes

    • 35x35
      Feb, 2012
      Bill
      One suggestion is for her to look into an FHA loan, which would only require a 3.5% contribution.
      0 Votes

  • 35x35
    Feb, 2012
    Rosa
    Hello!! I have a question about home equity loans. I owned a home worth a lot less than what I owed. I also have two mortgages on it. The first one is a regular mortgage loan that I acquire when I first bought the house the balance is about $100,000. The home equity loan balance is about $350,000. The bank closed my home equity line and requested payments I could not handle and last year we went through a modification of the loan. But before that I was served with foreclosure papers. Somebody told my husband that the home equity loan is like a credit card and the bank could not foreclose us. I find odd because they served us with foreclose papers before. I current on the mortgage payments and behind on the modification loan. I just received a letter from this bank that they are going to enforce collections. I am affraid and would like to know the worst scenario. thank you
    0 Votes

    • 35x35
      Feb, 2012
      Bill
      Either a first mortgage lender or a second mortgage lender may foreclose. Whether the second is a traditional mortgage or a HELOC does not change this rule. Please see the Bills.com resource Second Mortgage Foreclosure to learn more. I encourage you to ask any follow-up questions you may have on that page.
      0 Votes

  • 35x35
    Oct, 2011
    Carina
    Hi, I have a mortgage that I owe 55,000 and a line of credit that is about $94,000. My home is worth about $300,000. The line of credit is ballooning on November 1st. They are asking for a 8.75% interest and re-payment. I have excellent credit, but my income has changed. My debt to income ratio is not enough to re-finance. I'm getting help from my family to pay the bills now. I have never been late and always pay my bills. I can't get get anyone to co-sign for me since my family lives abroad. Both loans are with BOA. When I called them they told me that nothing can be done until I default. I also got a letter saying that they sold my line of credit debt to another bank. I'm going to have to pay about $600.00 more a month now. What can I do? Is there any banks that can help me? I'm desperate!!!!
    0 Votes

    • 35x35
      Oct, 2011
      Bill
      Your message lacks enough facts for me to give you guidance on your options. Based on what little I know, the most obvious option is to sell the property. Another is to contact NACA and see if this organization can help you refinance the loans.
      0 Votes

    • 35x35
      Jan, 2012
      Kenny
      I had a equity line of credit with a bank that was taken over by anothert bank. That bank recently notified me that the line of credit was reaching maturity in two months, and in two months the balanced owed was due. The balanced owed is right around 19,000 dollars. I have already paid the first mortage off. I asked if they could just modify the equity line to give me at least a few years to pay it off, they said I must go thru some special government program for a hardship. I had to provide them with all kinds of hardship paperwork, Both me and my wife have jobs, have no problems paying for a mortgage, but they said since I can't pay the entire 19,000 dollars now that is a hardship. That was almost 6 months ago and I am still waiting for them to give me an answer, they stopped accepting payments and are starting to send me pre foreclosure notices. With all that I think now I would have a problem finding another mortage company to give me a loan. I also didn't have insurance on the home because it was paid off, and the house is only a couple miles from the Ocean in Florida all the Insurance companies drop everyone because of those hurricanes about five years ago. I don't know what to do.
      0 Votes

    • 35x35
      Jan, 2012
      Bill
      You do not mention the value of the house, however it sounds like you have sufficient equity to refinance. Part of the problem is that lenders do not like to originate loans for such a small amount.

      It certainly sounds as if the bank has been unfair and misleading. The hardship program does not really apply, if you have jobs and can afford the payment. However, a lender has no obligation to renew a loan or line of credit that comes due. I recommend that you gather all the documents and correspondence which you have between yourselves and the bank. Paperwork is important. You can then file a complaint with the Federal Reserve. Also, speak to a local lawyer to investigate any legal options open to you. In order to solve the money situation, either return to the original bank and suggest a payment plan, or speak to a local bank or credit union and see if they can offer you a loan. Explain to them the circumstances, and show them proof of your income, assets and credit report.
      0 Votes

    • 35x35
      Jan, 2012
      Bill
      You did not mention today's market value of your property. I will assume it is worth more than $19,000. Talk to loan officers at local banks and credit unions and explain your situation. I imagine your credit score took a dive when you became delinquent on the loan payments. What is your spouse's credit score? Perhaps she qualifies for a mortgage.
      0 Votes

  • 35x35
    Sep, 2011
    lisa
    Hi- I have a 158,867.97 HELOC with a periodic rate of 0.0086301% corresponding APR of 3.1500% The APR is 3.1068%. This is on an investment property. We also have a 30 year fixed 1st mortgage on the property in the amount of 139,787.00 with APR of 5.875. We collect rent of 1900.00 per month. The HELOC interest only payment is about 400.00 and the mortgage is about 1300.00 per month. Is there anyway to refi these into one loan and, if so, would it make sense to do so?
    0 Votes

    • 35x35
      Oct, 2011
      Bill
      Without knowing what your property is worth and whether you meet the credit and income requirements that any lender demands, I can't say whether or not it makes sense. Given today's rates, I certainly recommend that you speak with some lenders to see what is possible.
      0 Votes

  • 35x35
    Sep, 2011
    Helen
    My HELOC was taken out in 2003. I have read the note several times, but am still not clear on several issues. I haven't drawn the full amount. The LTV is less than 50% (1st and HELOC max combined), so no worries there. The terms are great. Interest only for 10 years at prime or less depending on the loan balance, then the loan converts to a 2nd payment stream, (amortized, I think) with the balance due in 2032. I believe the rate stays the same, which can adjust monthly based on Prime +/- margin. My concern is what happens in January 2013 when it converts to the second payment stream. I'm afraid to call and ask questions, because I don't want to raise red flags. I have never been late on the payments. Will the bank ask me to re-qualify? I will not be able to qualify. When I qualified the 1st time, it was just based on 'stated income' and property value. Can they call the loan? If the loan will just continue on without anything required on my part, I would like to draw more money out. Will that raise red flags?
    0 Votes

    • 35x35
      Sep, 2011
      Bill
      Two contradictory responses to your message:
      1. Go ahead and telephone the mortgage servicer and ask your questions because the loan contract you signed binds both parties to its terms. The servicer cannot arbitrarily change the contract's terms, or make you requalify unless the contract states that it can when certain conditions occur. You have nothing to fear from the servicer's customer service representatives — they are there to help.
      2. Mortgage servicers will try to get away with whatever they can because they oftentimes do. Mortgage servicers have no reluctance to break contracts when it is convenient, and know that many homeowners lack the legal knowledge and resources to fight them when they violate the terms of the loan contracts they sign.

      Take your loan contract to a lawyer in your state who has experience in either contract litigation or real estate law. Ask him or her to read your loan contract, and explain to you the terms and conditions of the loan, and what will happen in January 2013. If the servicer later violates the contract terms, you will have a relationship with an advocate in place who can level the playing field in your fight with the servicer.

      0 Votes

  • 35x35
    Jun, 2011
    Vicky
    I have a heloc loan of 140K which matures in May 2014 (taken out in 2005 for mostly upgrades to the house). I have a first with a balance of 118K which I did a successful loan modification at the end of last summer. I'm current on all payments but am afraid of what could happen at the maturity of the heloc as it's a balloon payment. I will be a single mom at that time with no verifiable income. My roomate is currently helping me with the payments. I've read most of your articles and wondering if I should start to contact my bank (State Farm) now for a possible refinance (FHA short refi program)or best to wait out until 2014 and see what the changes are then? Any suggestions are appreciated. Thank you!
    0 Votes

    • 35x35
      Jun, 2011
      Bill
      If you have income now, a good credit score now, and a low debt-to-income ratio now, consider refinancing now to a fixed-rate, no-balloon second. It is difficult to imagine circumstances that will cause interest rates to fall even further than they are now.

      The wild card in your message is the certainty that you will have unverifiable income in 2014. Does that mean you will be paid under the table, or that your income will be sporadic or low? If you expect to be paid off the books in 2014, then by all means refinance now while (presumably) you are still on the books.
      0 Votes

  • 35x35
    Apr, 2011
    irgal
    My 1st loan and HELOC is same landing company, can my lender force forclosure if my HELOC is in 6 months past due status? I live in CA. Thanks
    1 Votes

  • 35x35
    Feb, 2011
    Mary
    I have an Equity Line of Credit, and have tried to refinance my first and the Heloc. Unfortunately, because my home is under water 30,000 I'm stuck with the Heloc. When interest rates go up, and I'm afraid of inflation hitting. I may lose my home. Is there anything I can do to get a fixed rate on my Heloc? I have gone to the lender and they offered me a whopping 9% interest rate! I don't think so. Is there any lender anyone knows of that is refinancing Helocs.
    0 Votes

    • 35x35
      Feb, 2011
      Bill
      When a home is underwater, lenders know that they have limited or no security, should you default on your loan. This makes it extremely difficult, if not impossible to refinance.

      You may want to speak to your lenders about the FHA Short Refinance program, which is designed for homeowners that are underwater. The FHA Short Refinance requires your lenders to reduce the principal balance on your loan, which they may not be willing to do.

      You are worried about inflation making it so that you can no longer make your required payments. That makes every dollar you have more precious. Maybe you can find ways to adjust your spending habits so that you could afford any expected hike in your payments. I recommend that you work on making a budget, if you have not done so already.
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    • 35x35
      May, 2011
      Gina
      FHA Short Refi requires that mortgage lender write down a minimum of 10% to bring the loan's balance down to make FHA refi work. But most first lienholders won't drop their principal when there is a second mortgage. After all, the second mortgage lender received a higher interest rate because it understands it is in the riskier position. The second lien should write off most (if not all) of what it has coming before the first lender writes down anything. That's why these things don't work very often.
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  • 35x35
    Jan, 2011
    Parag
    A HELOC allows people to withdraw money on a regular basis for a period of 10 years while paying only interest on the money, that is withdrawn, thus making it akin to using a credit card. At the end of the draw period the balance, that is yet to be repaid, gets transformed to a loan with a maturity period of 15 or 30 years
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    • 35x35
      Jan, 2011
      Bill
      The draw period on a HELOC usually ranges from 5 to 10 years. You are correct that during that time that the borrower only is required to pay interest. Most HELOCs have a repayment period of 10 to 20 years, in my experience. During the repayment period, the borrower has to make payments on the principal, paying down the entire principal balance over the number of months in the repayment period. It can be the case that the whole HELOC balance needs to be repaid at the end of the draw period, making it so the borrower has to refinance, sell the home, or have some other way of paying off the balance. HELOC borrowers need to make sure that they understand exactly how and when they will be required to repay the loan.
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    • 35x35
      Aug, 2011
      Angela
      My AmSouth bank extended to my a home line of credit in 2004, I was led to believe it was (I know I'm STUPID!) that would be used and to be paid by 2024. NOW, I find I have to repay 65,000 by Apr 2014! I can't eat or sleep as well you know,I as WE all, are not AT ALL in the income range as WAS! I am terrifid to even speak to my lender, (Now Regions) for fear to send up a red flag, that I can't pay in that time. I however, have excellent credit (so far) and need advice to approach refinace of this loan. I still have equity of approx. 40,000, and keeping my "head above water" so to speak. PLEASE, can you help me?
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    • 35x35
      Aug, 2011
      Bill
      You should look at refinancing to pay off your HELOC, if you can qualify for a loan. I understand that your income has dropped and I don't know the value of your home, so these may be barriers to refinancing, but speak to some lenders to see. Look into FHA loans, if your LTV is high.

      If refinancing is not an option and you can meet your current monthly payment, I don't see much benefit to speaking to your lender now. Perhaps your income will improve in the next few years or other circumstances will change.
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