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

Are Twenty Percent Down Payments Required by Lenders These Days?

Are twenty percent or ten percent down payments required by lenders these days? FHA loans were originally intended to help first-time home buyers, so the down payment requirements are flexible. The buyer can put as little as 3% down. In this situation it is OK if you get that money from a relative. These days lenders on other loans are generally requiring at least 10% down and want to confirm that this would be your own money. Some lenders are requiring extra money upfront. FHA loans may be the only way for people who have small down payments.Posted by Harrison K. Long, Explore Properties Group, March 27, 2008

What Causes Mortgage Rates to Rise?

If Retail Sales in January were better than expected, that's good news for Stocks. But if money flows into stocks, this causes money to be pulled out of Bonds. That in turn causes long term Bond prices to move lower. If US Fed Reserve Board cuts the short term rate on funds, that worries bond traders about the risk of more inflation. Some folks believe that cuts to the Fed Funds Rate generally cause home loan rates to rise, not decline. Why? Because Fed Rate Cuts can spur on more inflation, and it becomes less expensive to finance business and personal purchases. As a result, inflation erodes the value of the fixed return provided by a Bond. In the face of inflation, long term bond prices fall, and home loan rates rise.
Posted by Harrison K. Long, Explore Properties Group, Feb. 17, 2008