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‘Payment Shock’ on Home Credit Lines Could Threaten Millions of Americans

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payment shock home credit

Home equity borrowers, beware: Substantial “payment shock” could be coming soon to a mortgage near you.

Many home equity lines of credit (HELOCs) taken out in 2005—just as home prices were peaking—may be nearing the end of their 10-year, interest-only payment periods. With a rise in interest rates likely coming soon as the Federal Reserve winds down its easy money policy, monthly payments on these variable-rate loans could soon soar for millions of Americans.

If you’re in this situation, you may be able to avoid a potential financial disaster by refinancing into a fixed-rate mortgage or a new HELOC, or by enrolling in the Federal Housing Administration’s Short Refinance program. But first, review the full details on your loan to make sure you know what may be coming, or contact your lender to bring you up to date.