Home Equity Line RESETS Are Coming Due!!! Homeowners with HELOCS may get a BIG surprise in the coming months as their loan payment skyrocket when the payments reset.
The Housing bubble and bust- we are not out of the woods yet. Residual effects are still in the making.
Home Equity Lines of Credit- HELOCS are when you take a loan out for things like college, vacations, buying another property, remodeling, etc.
During the boom years these HELOCS were very popular because the prices of the houses kept going up.
The states of Florida, California, Nevada and Arizona had the BIGGEST surges in home prices.
These are also the same states that saw the biggest number of defaults, foreclosures and short sales.
The HELOCS were offered with payments of interest only for 10 years. Guess what, 10 years is coming up and for those who took out HELOCS in 2004 are already getting their new payments and surprise, surprise, they are MUCH higher than the interest only payments were.
For instance, if you took out a HELOC on your house of $100,000 at 3.5% interest rate your payment is $292 per month but once it resets it will jump to a whopping $715!!!!
Are you ready for your new payments?
I must say, I am SOOO happy we did not get one of those HELOCS as tempting as it was.
There is an estimated 817,000 people this year alone who will be faced paying the piper to the tune of $23 BILLION in HELOCS– this is more than double of what it was last year.
Then during the next 5 years another $50 BILLION in HELOCS will be reset.
All of this is going to contribute to a more sluggish U.S. economic recovery because that $500 per month is not going to be going to buy new cars, spend on vacations, etc. It is going to be used to pay back these HELOCS from things you already spent the money on. This is money not going into the economy in goods and services. This money is being sucked out of consumer spending and that sound is not attractive to say the least.
Most people who have HELOCS can not refinance because they don’t qualify or they were behind on their upside mortgages and the like.
Another problem that all this creates it that the banks know that most of these kinds of HELOCS are uncollectable as there is not enough equity to foreclose on the second to any benefit to the HELOC bank since the first note holder needs to get paid first.
The other issue is that the banks will tighten up extending mortgage loans to all but the most credit worthy buyers because of the losses they will have to suck up due to people who won’t be able to make that reset payment.
Some banks are being proactive and reaching out to their customers two years before the resets come due to warn the borrowers as well as trying to work with them on getting these HELOCS paid off or refinanced.
Look at your paperwork from when you took out your HELOC. Make sure you know your interest rate and when your payments are going to reset. Then make sure you plan to meet those payments or call us to see if there is enough equity in your house. If you have enough equity in your house, we may be able to list your house for sale and you can move on.
Contact Broker Nestor Gasset at 561-541-9936 to discuss your options confidentially now.
Katerina Gasset is the author of http://www.wellingtonfloridashortsales.com. Katerina Gasset is the homeschool mother of 9 children and wife to Nestor Gasset. Katerina Gasset is also a writer, author, speaker, Realtor®, SEO coach, blogging coach and business entrepreneur and consultant.