/ Ask Terry Questions / Home Equity Credit

Home Equity Credit

By Terry Savage on March 29, 2021 | Credit/Debt

Hi Terry,
My wife and I own our home – it’s small but we have no mortgage payment. I like the idea of having nothing owed against the house but over the pandemic year have had some income losses that are causing our credit cards to add up too quickly. Are there any downsides to using a home equity line of credit to pay off the higher interest cards at a lower rate over a 30 year term? The monthly savings look significant on paper.

Terry Says

The huge downside to a home equity loan or line of credit is that in a period of rising rates, the monthly payments could rise sharply. Plus most home equity loans have a “balooon payment” due at the end of 5 years. At that point rates could bea lot higher. I’d rather see you take out a 15 year fixed-rate mortgage and pay off that credit card debt.

money

ASK TERRY

a personal
finance question