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Refinancing Home Equity Loans

Friday Aug 3, 2018
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Home Equity Lines of Credit or HELOC’s, also referred to as a second mortgage, have always been a popular avenue for home owners to tap into their home’s equity at a low interest rate. The problem with HELOCs is that they often carry a variable rate and when interest rates start to rise, so will the payments.

When the fed announces another rate hike in the coming months, HELOC’s will instantly go up by a .25% to .5%. The rule of thumb in today’s financial world is that each quarter the rate will increase by a .25% to .5% so this time next year, those HELOC rates will be a full 1% to 2% higher than they are today.

We have already seen two rate hikes in the last six months and people with HELOCc are feeling the effects. Many home owners with HELOCs might have been lulled into making the low interest only payments over the last few years and neglected to pay down the principle, creating a ripple effect because the principal is not being reduced, at the same time the interest rate is increasing. If home owners do not take some kind of action to get these HELOCs paid off or paid down, they can realistically see their payments double, triple, or quadruple over the next few years.

With mortgage interest rates still at reasonable levels, now would be an opportune time to look into refinancing both the first mortgage and HELOC into a low fixed rate mortgage, if the home owner has enough equity to accommodate both mortgages.

If the borrower is a military veteran, there’s more good news-- they can refinance up to 100% of the value of the home to accommodate this. FHA will allow up to 97% loan to value. We encourage borrowers with HELOC’s to call Indigo Mortgage and see if a refinance will improve their loan payoffs and perhaps save some money each month.

Indigo Mortgage is a locally owned and operated company, serving homebuyers in Albuquerque, Rio Rancho, Santa Fe and all across New Mexico. For questions about selecting a mortgage lender, contact Indigo Mortgage in Albuquerque at (505) 836-5700. Indigo Mortgage offers five mortgage divisions including Residential, VA Loans, Reverse Mortgages, Construction and Commercial. They are licensed by the Nationwide Mortgage Licensing System (NMLS #188348), and can provide loans anywhere in New Mexico.

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