Some time ago we wrote about this issue. Now the time has come so we are putting out the warning one more time.
Ten years ago we were at the height of the real estate bubble. We all know what happened soon after that. In the years leading up to that time and a few after that millions of people took out home equity lines of credit. Called HELOCs in the mortgage business. These were a type of mortgage loan that people could tap into for money as they needed or wanted it. Very convenient!
Typically these loans required only interest payments for a period of ten years. When the ten years is up, the loans convert to fully amortized loans with regular monthly payments of principal and interest.
This is our warning to anyone who has a HELOC loan taken out in 2005 or soon after. When your ten years are up, you will be in for a shock. When the loan converts the payments will go way up.
Millions of these loans are outstanding for billions of dollars. The financial industry is warning banks and other lenders to be ready for defaults when homeowners suddenly cannot make these payments.
Here’s a link to more detailed information: http://hamptonroads.com/2014/01/10year-trap-primer-home-equity-lines-credit
If you have one of these loans we urge you to find out about your options for handling the reset before, rather than after it happens. There are options available. Dig out your paperwork and call Libby Guthrie at 925-628-2436. Libby is the mortgage expert of The Guthrie Group. She spent many years in the mortgage industry and knows it well. She can tell you what will happen when and can talk to you about what options are available.