Know Your Home Equity Loan Payment Outlook
You’ve been offered a loan and the numbers look good, but
it’s difficult to know exactly what your monthly payments will be. After all,
this is the number you will need to budget for each month. Let’s make sure
it’s a number you can live with.
See how much you will be paying each month when your HELOC adjusts.
Fixed-rate home equity loans make it fairly easy to determine your monthly payments.
HELOCs are more complicated and there are two factors you should know about that
determine your payments – the prime rate and margin.
The prime rate is what your interest rates are tied to.
The margin is extra points your lender charges for the loan. The prime rate plus
the margin determines your interest rate. At the end of your initial period, the
margin and current prime rate are added together to determine your new interest rate.
Margins are included in most HELOCs, so make sure this is a number you can live with.
The combination of both higher prime rates and your margin can often cause your payments
to increase quite a bit at each adjustment.