The best time to refinance your HELOC is now with the recent 2018 tax cuts to the home equity line interest deduction.
Home Equity Lines of Credit often offer Sale rates – basically a low-rate that increases after year one. That low rate year encourages you to stack balances onto the HELOC that will take many years, perhaps decades to pay off.
A common misconception is that you can jump from a HELOC to a fixed rate mortgage before mortgage rates increase. Prediction of that dispatch date is difficult. The misconception arises from the fact that rates of a Fixed mortgages and HELOC’s are driven by different forces.
A HELOC rate is derived from a human controlled index, (The Federal Reserve sets the Prime Lending rate) whereas the mortgage rates are derived with the Yield of the 10-year Treasury Bond. Because bonds are a traded product they are market driven. Market driven products can rise or fall, without caps, at any time. There is no direct human influence on mortgage rates – only market influences.1
Predicting the direction of mortgage rates requires knowing the direction of the 10-year treasury bond (a debt instrument). Knowing the direction of the 10-year bond would require knowing the how the stock market (equities) is going to perform. The investment cycle is complicated and routinely predicted wrong by Ivy League educated, seven figure earning traders.
So how do we guard against bumping into the 19.99% cap on your Home Equity Line of Credit. You posture defensively. Inquire about converting your balance to a fixed Home Equity Loan through your existing provider. If the rate that provider offers isn’t palatable please talk to us about a no obligation refinance rate quote. We have offering that include No Closing Costs and all of our products, including Jumbo, come as fixed rates.
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John Donlon is the Co‐Founder of GoldCoast Mortgage, Inc., one of the earliest licensed mortgage corporations in the nation. GoldCoast was founded, and fiercely protects, their extreme service model which puts the client’s needs ahead of corporate needs. In an age of technology-based applications you will find their guidance, knowledge, and process very enlightening, comforting and efficient. GoldCoast Mortgage Service, Inc. agents are licensed and arrange residential and commercial mortgages in MA, NH and ME.
1. Quantitative Easing was an exception to this. This is when the government purchased its own bonds, attempting to keep rates low. It worked … for a period of time. We are now engaged in the unwinding effect of that phenomena.