Heloc

[struggling09]

We are waiting for our attorney's office to finish our petition to file for Chapter 13. I received a call from my mortgage company today regarding my HELOC (Home Equity Line of Credit). We have a first mortgage (balance $299,000) and the HELOC (balance $98,000). Our house appraised at $310,000. The HELOC is currently in a locked rate, interest only, for the next 2.5 years after that point it will adjust to whatever the prime rate is. According to the bank, I have two choices

1. I can readjust to a vaiable rate now lowering my monthly payment, but risking the interet rate rising.

2. Or wait for the lock to readjust in 2.5 years.

I am concerned that when the rate does adjust I'll be in the middle of my repayment plan. I don't know what to do! I don't want to through all that I'm going through with the Chapter 13 and have it fail in two years, once the rate adjusts.

Is there anything I can do???

[Trixie007]

Does your HELOC have a feature that allows you to close the line of credit and have the loan locked for the remainder of the term? Often that is the case. That would amortize the payments, principal and interest, over a fixed amount of time, which would likely increase the payment... but might that be to your advantage in a Ch 13?

[struggling09]

Yes, they told me I could lock it in now paying towards principal and interest; however, it is going to raise the monthly payment by $564/month, which we definitely can not afford.

I feel like we have no options at all!

[Trixie007]

Yes, they told me I could lock it in now paying towards principal and interest; however, it is going to raise the monthly payment by $564/month, which we definitely can not afford.

I feel like we have no options at all!

I guess I'm just wondering... does your plan involve money going to your unsecured creditors? If so, you would be better served paying more on your HELOC than giving them money. Maybe this would not be allowed, I don't know.

It's really hard to give an opionion on your situation without knowing what your rate currently is, what it would go to if you went variable now, what the rate would be if you converted the loan, etc. I would say, though, that if you are concerned about what will happen in 2.5 years, you would at least save yourself the stress in that amount of time if you just stay fixed for now. Who knows what could happen in that time frame - maybe income could rise??

[catleg]

[struggling09]

How do you have a lien stripped? And how do I know if it's permitted in my district. I live in Delaware.

[catleg]

There is a sticky post at the top of this forum.

[relief13035]

Oh the "lovely" HELOC's that many of us were lured into.

What I would give to go back in time and 'JUST SAY NO'

[BnkrptcyLwyr]

We are waiting for our attorney's office to finish our petition to file for Chapter 13. I received a call from my mortgage company today regarding my HELOC (Home Equity Line of Credit). We have a first mortgage (balance $299,000) and the HELOC (balance $98,000). Our house appraised at $310,000. The HELOC is currently in a locked rate, interest only, for the next 2.5 years after that point it will adjust to whatever the prime rate is. According to the bank, I have two choices ....

YOUR CHOICE IS TO WAIT TO FILE!!!!!

You may be able to strip that second mortgage if that appraisal gets down below what you owe on the first mortgage.

Being in Delaware, you are in the Third Circuit - and they allow lien strips of second mortgages! The case is In re McDonald, 205 F.3d 606 (3rd Circuit, 2000)

[catleg]

Can you deduct sale costs from the appraisal to reduce the secured amount?

[njguy1972]

I was in a similar situation and chose the lower variable amount.

I figured saving $200 a month will help me more than playing games with the mortgage.

My rate on a $105k HELOC went from 10.5% to 6.5%. Rates should be low for the next 2-3 years until the economy recovers. I am hoping in 3 years my home value surpasses what I owe (165k mortgage and 105k HELOC on a home worth about 230k).

Depending on how tough my trustee is, I may be forced into a short sale anyway.