With Greg McBride, Chief Financial Analyst – Bankrate.com
Your home equity offers a viable low-cost borrowing option as a revolving line of credit, with average rates now near the 4% to 5% level, and even less after taxes. It’s been a pretty easy ride but the good old days are soon going to be gone… because, while earlier these loans allowed interest-only payments for quite a while, that is now set to change with HELOCs now requiring concurrent payment of principal and interest – which can double the monthly payments for many, in an environment of low or no wage growth.
Many HELOC borrowers have also seen their home values drop since pre-2007 highs and many of these borrowers will not be able to refinance their home equity lines to stave off these impending higher payments. If your back is to the wall, consider contacting your lender to see if they’d be willing to restructure and lower your monthly payments to prevent default.