In the next few years, millions of homeowners will face this previously unforeseen issue concerning the HELOC reset and the increased payments that occur as a result. Although some of these homeowners may be able to affordable the higher payments, most will find themselves in a financial crisis because of the contractual trap imposed by their HELOC. If you’re one of these people, you can help yourself.
First and foremost, carefully look over your agreement document to check whether your loan is subject to an upcoming payment increase. Look at the dates, including the borrowing period and the repayment period (your contract might use different terminology to state this). After finding your HELOC reset date, determine your new payment schedule that will include the principal. Although lenders are sending advanced warnings to consumers regarding the payment increase, you should call your lender to get this reset and payment information if you haven’t already.
Once you know the terms of your HELOC reset, you can begin to prepare for the payment increase. If you’re able to handle the payment increase, you should pay it while you can so you can avoid damage to your credit that other payment plans can cause. If you’re unable to handle the payment increase, you may have to consider a loan modification or file for Chapter 13 bankruptcy.
Prior to taking any further action, it’s wise to speak with an experienced real estate attorney who can help you through the process and determine the best solution.