How To Manage Your HELOC Loan With Rising Rates?

Most HELOC loans (home equity line of credit) are indexed to the bank prime loan rate. When the prime rate changes, the rate on your HELOC will change also.

When prime increases 100 basis points (one full percent) the home equity line of credit borrower pays more in interest costs.

If you make monthly payments according to a fixed schedule, the rise in rates also means less of each payment goes towards reducing principal. So it will take longer to pay off the loan balance.

How to manage your HELOC loan?

One possibility is 0% Balance Transfer Offers. If you have good credit and are careful, transferring some or all of your HELOC debt to a 0% credit card can be a workable strategy.

You can ride the 0% offer until it expires. You can pay off the balance with a HELOC check (effectively transferring the balance back to the HELOC). However, there are limitations.

Be careful with this. It can be complicated. We recommend that you consult with a qualified Realtor or tax specialist in your area or jurisdiction.

Posted by Harrison K. Long, Explore Properties Group, May 21, 2008