With interest rates rising, the millions of homeowners who have home equity lines of credits (HELOCs), have found that their payments are suddenly getting more expensive. HELOCs are generally adjustable rate, tied to shorter term interest rates, which means that the payment changes once a year, so higher interest rates mean higher payments. Not all HELOC borrowers actually use all of the line of credit, but those who use all or some of it will see higher monthly payments. The increases could average about $100 more per month, depending on the size of the loan.
Newer borrowers will not be as hard hit as those who have had their loans for a decade and are now facing a reset. HELOCs can have what is known as a 10-year “draw” period, when borrowers only have to pay interest on the loan. After 10 years, principal payments are added.