Over the next few years, millions of homeowners must somehow find a way to face this previously unforeseen HELOC reset problem and resulting payment increase. Though some may be able to handle a larger payment, there will still be an enormous number of homeowners who will find themselves in a financial crisis because of the HELOC contractual trap. If you think you may be one of the many homeowners who will be prey to an upcoming HELOC payment increase, there are some things you can do to help handle the situation.
First, if you are not sure whether your loan is one that will be subject to an upcoming payment increase, take a close look at your agreement document. Look for the dates pertaining to the Borrowing Period and the Repayment Period, bearing in mind your contract might use slightly different terminology. When you have confirmed the date when your HELOC will reset, you need to determine the new payment schedule, including principal. Many lenders are sending notices well in advance to warn consumers about the pending payment increase. If your lender has not yet provided you with this information, then you should be able to determine the new payment from the contract terms and the help of a loan or mortgage calculator. Don’t be afraid to call your lender about your reset payment either, as they can easily provide you with this information.
Once you determine what your reset terms are, you have options with how to manage the payment increase. For some homeowners, an increase from $250 to $500 per month is manageable. If you are able to fund the new payment, it may be better for you to pay the increase while you can in order to avoid the likely credit damage posed by some of the other plans.
If you are one of the many who cannot afford a higher payment, you are not without recourse, though some of your choices may be less attractive than others. One route you can pursue now is arranging a loan modification with your HELOC lender before the payment increase takes place. You could also modify your first mortgage and apply the savings to your payment increase. A more dramatic option involves stripping the lien imposed by the HELOC reset via a Chapter 13 bankruptcy. Before taking any action, please be sure to consult with an experienced professional who can warn you of the potential risks of trying to work around the HELOC payment increase.
Stephen K. Hachey, a Florida foreclosure attorney, can help your wade through this process and determine a positive solution. Contact him at 813-549-0096.
The opinions in this post are solely those of the author. The author takes full responsibility for the content. Like all blog posts, this is offered for general information purposes and does not constitute legal advice.