Regardless
of the minimum payment required, you can pay more than
the minimum and many lenders may give you a choice of payment
options. Consumers often will choose to pay down the principal
regularly as they do with other loans.
For example, if
you use your line to buy a boat, you may want to pay it
off as you would a typical boat loan. Whatever
your payment arrangements during the life of the plan--whether
you pay some, a little, or none of the principal amount
of the loan.
When the plan ends you may have to immediately
pay the entire outstanding balance.You must be prepared
to make this balloon payment by refinancing it with the
lender, by obtaining a loan from another lender, or by
some other means.
If you are unable to make the balloon
payment, you could lose your home. With
a variable rate, your monthly payments may change. Assume,
for example, that you borrow $10,000 under a plan calling
for interest-only payments. At a 10 percent interest
rate, your initial montly payments would be eighty-three
dollars.
If the rate should rise over time to 15 percent,
your monthly payments would increase to $125. Even with
payments that cover interest plus some portion of the principal,
there could be a similar increase in your monthly payment,
unless the agreement allowed keeping payments level throughout
the plan.
When
you sell your home, you probably will be required to pay
off your home equity line in full. If you are likely to
sell your house in the near future, consider whether it
makes sense to pay the up-front costs of setting up an
equity credit line. Also keep in mind that leasing your
home may be prohibited under the terms of your home equity
agreement. |
Questions?
LendFast.com - Repaying your home equity line
