Almost four million people who bought homes and took out home-equity lines of credit between 2005 through 2008 are about to go into the repayment period. Right now you may have just been paying into. Something Wicked This Way Comes – HELOC Reset Almost four million people who bought homes and took out home-equity lines of credit between 2005 through 2008 are about to go into the repayment period. Right now you may have just been paying interest only and it has been something you can manage. The repayment period includes interest AND principal and typically shoots the payment WAY UP. This can spell doom for many homeowners.
What do you do? First, don’t bury your head in the sand. Call your bank and find out when your payment will reset and for how much. A lot of lenders will reach out to you before your HELOC loan resets. Can you afford it? If not, ask your lender whether they are willing to refinance it into a new home equity line of credit (with a new draw period) or a loan with terms that are affordable for you. Maybe they will even extend the repayment terms on your present loan from the current 10 years to say 15 to 20 years. If you fail to get traction in your communication with the bank, contact an attorney that can help you obtain a loan modification. We handle these from our offices in Orlando.
Another option you need to consider is a Chapter 13 bankruptcy. In a Chapter 13 bankruptcy, in addition to wiping out your credit card debt, we can sometimes eliminate your second mortgage, home equity loan, or home equity line of credit (HELOC). If your first mortgage is higher than the value of your home, we can wipe out the resetting HELOC. Meeting with clients that want to file bankruptcy in Orlando, we have seen many of these homes are still underwater.
Another way to help with a Chapter 13 bankruptcy is to try to get a loan modification on the second mortgage through the bankruptcy judge ordering the bank to sit with us AND YOU to try to obtain a more manageable payment.