best home equity loan
A few options to lower costs of home equity line of credit
Lots of consumers have watched the rates double on their home equity lines of credit in two years.
Say you took out a credit line at the prime rate two years ago and borrowed $30,000 against it.
Back then, you faced a monthly payment of $100. Now that same loan at the prime rate costs $206 per month.
That's even more dramatic than the rise in gasoline prices.
If you have a home equity line of credit, or HELOC, you have at least five options:
Keep the credit line and pay down the balance.
Dennis Grundler of Henderson, Nev., manages his debts like a corporate chief financial officer, always seeking the best deal.
Not counting his mortgage, he has about $67,000 in debts, spread on various credit cards with low introductory rates.
More best home equity loan info
CONSUMER WATCH: ARMs present some risks as rates increase
Lenders boost their home equity lines of credit nearly every time the Federal Reserve Board raises a key interest rate. Adjustable-rate mortgages are going up as well, though most have some built-in protections from fast-moving rate adjustments.
After four quarter-point Fed increases in 2006 alone -- a total of 17 consecutive increases since 2004 many consumers are in debt over their heads. More may be looking at foreclosures.
Mortgage delinquencies rose in the first quarter of 2006 over the same period in 2005, reported the Mortgage Bankers Association in Washington
"Additional modest increases in delinquency and foreclosure rates are likely in the quarters ahead," warned MBA chief economist Doug Duncan.
With every spike in the federal funds rate -- the rate banks charge one another for overnight loans -- banks respond by raising the prime rate, the interest rate they charge their best customers and the ones most often tied to home equity lines.