Many of you who own Russ Lyon Sotheby’s homes like to take out a home equity line of credit for home improvements or maybe new furniture. But interest rates are going up and that’s going to impact the amount you owe on your home equity line of credit.


While many of you have fixed-rate mortgages, home equity loans are usually an adjustable rate, tied to shorter-term interest rates. As a result, your payment changes once a year. So, a home equity line of credit on a Russ Lyon Sotheby’s home means higher payments due to higher interest rates. In fact, some borrowers might see an average increase of $100 more per month, depending on the size of the loan. 


Home equity lines of credit were popular during the housing boom. Originations for them peaked in 2005 before dropping off in popularity, along with home values, by 2010, according to Core Logic. Then home equity lines of credit originations jumped back again in 2014 as home prices mounted, including those of Russ Lyon Sotheby’s. 


Newer Russ Lyon Sotheby’s borrowers won’t be hit as hard with the higher interest rates as those who’ve had their loans for at least ten years and are facing a reset. Home equity line of credits has a ten-year “draw” period, where you only have to pay interest. After that, principal payments are added. Most home equity loans during the boom did not require principal payments in the beginning and those are the ones resetting now.  


Most borrowers surveyed by TD bank are not aware their monthly payments will be going up with the reset of a home equity loan. One-quarter have no idea financially how to handle the end of their draw periods. If you don’t have a financial plan for the higher payment, it’s recommended you contact your lender as soon as possible.


If you haven’t already checked, look into how much your monthly home equity line of credit payment will be going up due to higher interest rates. If you’re a newer Russ Lyon Sotheby’s borrower, chances are, you won’t be hit as hard.