When Are HELOC Balloon Payments Due?

A difficult time is just beginning for millions of homeowners, and could wreak havoc on borrowers’ personal finances and threaten to throw many into foreclosure. Beginning this year, more than half of all existing HELOC (Home Equity Lines of Credit) will face a reset, leading to rate increases and balloon payments coming due.

HELOCs have a period of time during which the borrower can make withdrawals against the credit line, backed by the home’s equity. For most HELOCs, this period is set for 10 years. That means any HELOC established in 2004 is coming due this year.

The Treasury Department says that 58% of all HELOCs will come due between now and 2017. When the 10-year terms of those credit lines expire, borrowers will face many potential risks:

  • Higher Payments: If you have used any of your line of credit under a HELOC and haven’t repaid it, you will now have to make full payments until it is completely repaid. That includes both the principal and interest; which will certainly make the payments higher than they were during the initial draw period.
  • Higher Rates: If your HELOC resets to a higher interest rate, that will increase your payment even more. If you were just barely able to make your payments on the HELOC up to now, then you might be in real trouble if your rates reset.

  • Lower Equity: If your home has declined in value, you may be stuck repaying a line of credit that was borrowed against now-lost equity. That means even after you finish repaying your HELOC, you end up significantly worse off.
  • HELOC Balloon Payment: If your HELOC came with a balloon payment, then everything you owe will be due in one lump sum payment. This balloon payment could be devastating for unprepared borrowers.
    • It is possible that when your HELOC balloon payment date comes, your lender may offer to refinance your home loan to help you make the payment. But if your home has lost equity, you may not be able to refinance your way to repaying a large balloon payment.

      We offer free HUD-approved housing counseling, designed to help people like you save your homes. If you have a HELOC balloon payment date looming, please call us for priority HELOC counseling and we’ll help you create an action plan to face potential financial hardship from a HELOC reset and get access to the right mortgage relief programs for you.