Time to refinance HELOCs?
Many homeowners who borrowed against their equity with home equity lines of credit or other variable-rate loans might want to consider refinancing this winter. Once the Fed raises the federal funds rate, these loans may become more expensive -- and borrowers will find higher rates on fixed-rate loans, too, mortgage experts say.
"If someone has a large line (of credit) and rates start jumping, that can drastically impact the individual's ability to pay the loan," Royle says. "I would strongly encourage people to consider refinancing into a fixed term now."
Proactive, not reactive
Royle says he has seen a number of people refinancing because they have HELOCs whose draw periods are about to expire. But few people are refinancing because they are aware that rates will rise, he says.
"I think that's going to be the problem," he says. "The consumer will be in a reactionary mode. I would encourage people to be proactive and refinance now."