Looking for Options on Your Home Equity Line of Credit

Sheryl Landrum
LoanBiz Columnist


Two years ago when prime was 4%, your home equity line of credit for $100,000 generated a payment of $333.33 per month; now with the prime rate at 8.25%, that $100,000 gives you a monthly payment of $687.50; this is more than twice the original loan payment.

After 17 consecutive rate hikes by the Federal Reserve, the prime rate is now at 8.25% with no guarantees it won’t be raised again. Is there a way to protect yourself from higher payments on your home equity line of credit?

Four Options for Home Equity Line of Credit:

• Keep your home equity line of credit and pay extra.
  Home equity lines of credit are interest-only payments for the first ten years before they become fully amortized. Putting a little extra cash toward your loan each month will help to reduce your mortgage balance.
• Pay off your home equity line of credit with a fixed rate home equity loan.
  A fixed rate home equity loan is generally only a .25% better interest rate than a home equity line of credit, and you have the security of a fixed rate payment each month.
• Check out the new hybrid home equity lines of credit.
  Some of the top lenders are now offering borrowers the ability to fix all or part of their home equity lines of credit with a fixed rate.
• Refinance your first mortgage and pay-off your home equity line of credit.
  Talk to your lender and run the numbers to see if it makes sense to refinance your first mortgage to a higher loan amount to pay off your home equity line of credit.

Call your mortgage broker or lender today and find out what your loan options are. You may be surprised to see how easily, and cheaply, you can take control of your home equity line of credit.

About the Author
Sheryl Landrum is a Senior Loan Officer with First Capital Mortgage in San Diego and Prudential Realty in Bonsall, California.