Home Equity Line of Credit Reset

[Miss Marty]

A HELOC or home equity line of credit has 2 stages.

First is the draw period, which usually lasts 10 years.
Monthly payments are applied only to the interest during the draw period.

After the draw period ends, the second stage begins:
The HELOC goes into the amortization period, when you have to pay principal as well as interest. Monthly payments go up.
If you still owe a lot, the payments rise abruptly.

Anyone have any experience with a home equity line of credit
payment RESET where you could not afford the new payment
and had to do a loan modification. What did your mortgage
company do to help you and how long does the process take?

 

[mdurette]

Sorry, I don't have the direct answer to your question - but the easier way to deal with that than a modification is to just open a new HELOC and transfer the balance over and start a fresh 10 year draw period. If the person can't qualify for a new HELOC, then the only option is to work with the current lender. Typically the bigger the lender, the longer it will take to work out.

Another option to consider is to rewrite the heloc into a 1st mortgage. 1st mortgage programs have more to offer to assist with qualifications, credit and equity issues.

 

[presley]

I didn't have that issue as our HELOC payments were never interest only. We had a variable interest rate that never went over 4.5%, but it could go up to 12%. We just rolled it into a refi with our mortgage last month because we expect interest rates to go up at some point. The overall minimum payment due is about $500. less than when we paying the 2 separately. You may want to look into doing something like that if you are still paying your mortgage.

 

[geekette]

My HELOC is simply a line of credit, no steps like "draw period" and definitely no interest-only pmts. It's just a loan I pay like I pay the mortgage, pmt amount varies as the balance varies. I'd agree with previous poster, attempt refi. If you have one or can join one, use a credit union, they can be very very friendly. I am always against interest-only, and 10 years is a long time to have a chunk sitting out there making no progress at chipping away on. The piper was going to have to be paid, expensively.

I would secondarily suggest considering selling the property. If there is a mortgage and a HELOC and unable to meet both obligations, it's dicey to live like that in case of job loss or other income snafu. If things get really bad, they'd take the house yet a forgiven loan is "income". Avoid that at all costs.

 

[VacationForever]

My HELOC was like yours, interest only for 10 years. I opened it for the purpose of covering short term cash flow issue and would only use it when I knew I had money coming in to repay it immediately. Good luck on trying to refi this. I think it is going to be difficult. Maybe you can ask the current lender to turn it into a 15 or 30 year mortgage? Selling your home is definitely an option but I think that is not the answer that you are looking for.