July 11th, 2019 1:19 PM by Steven Hofberg
As mortgage rates continued their decline over the first half of
this year, I had the opportunity to speak with many clients and potential
clients about their current mortgage debt. In discussing options with them, I
found that some had a Home Equity Line of Credit (HELOC) in addition to their
first mortgage, some of which had substantial balances. The rate on most
HELOCs is tied to the Prime Rate, typically the one posted by the Wall
Street Journal. In 2008, it reached a low of 3.25% where it stayed until 2016.
However, has been steadily increasing since then and is currently at 5.50%.
Homeowners who took out a HELOC during the period from 2008 to
2016 saw no change in their interest rate for that entire period. For some, it
felt like a fixed rate loan with a rate in the middle 3s. But over the last
three years, the rate has increased by 2.25%. Payments have increased and now
there is uncertainty over future increases.
Here is what I did for two clients last week. They refinanced
their first mortgage and the HELOC into a single fixed rate mortgage. The
Savings of a few hundred
dollars a month.
Principal and interest
paid on the entire debt instead of interest only on the HELOC.
Uncertainty of future
rate fluctuations removed.
If refinancing your HELOC is something that interests you,
please contact me to discuss your particular financial situation.
Margie Hofberg, President