Some homeowners who had FHA/VA loans were offered a loan modification that promised a permanent principal reduction. The amount of the principal reduced was turned into an interest-free second mortgage and was due only when the first mortgage was paid or when the home was sold.
Generally, these borrowers pay only interest during the first 10 years of the heloc before it resets. When it resets, borrowers will have to pay BOTH interest and principal payments for the first time.
If your permanent FHA/VA principal reduction occurred in 2004 or 2005, the new payments with interest will be starting soon. We have seen homeowners quoted jumps from 0% interest to 13% interest. In some cases, the heloc payments were now more than the first mortgage payment. If the household has not had a significant increase in income during these past 10 years, these adjusted Heloc payments may be impossible for homeowners to pay.
If you are caught in this situation, please call us at 623-694-0354 and we will guide you to the best resources to help you make a decision on your home. Your best bet is to be proactive and call your lender to see what your new interest rate and payments will be so you can adequately plan for your next move.
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