Latest news with #DebbieCalixto
CBS News
06-05-2025
- Business
- CBS News
What happens if you can't pay your HELOC? Experts explain
We may receive commissions from some links to products on this page. Promotions are subject to availability and retailer terms. Missing payments on your HELOC could result in big repercussions, especially over time. Getty Images/iStockphoto American homeowners are sitting on near-record home equity levels in 2025, with the average owner having over $200,000 in tappable equity currently — and about $313,000 in total home equity. This wealth surge has prompted many to open home equity lines of credit (HELOCs) to fund renovations, consolidate debt or cover major expenses at lower interest rates than alternative borrowing options. While HELOCs offer flexible access to funds, today's economic climate can make it difficult to keep up with monthly payments on any type of debt. Still, missing payments on these lines of credit, which are secured by your home, carries serious consequences, so it's important to understand what can happen before opening one. To help you better grasp what could happen if you miss your HELOC payments, we spoke with lending professionals about the possible repercussions — and how to protect your finances and home before it's too late. Learn about the many benefits of home equity borrowing now. What happens if you can't pay your HELOC? Experts explain Here are a few things that can happen when you fall behind on HELOC payments: Late fees and penalties "[Your lender will] assess late fees if a HELOC payment is late," explains Debbie Calixto, sales manager at mortgage lender loanDepot. These range from $25 to $50, depending on your lender, according to Steven Glick, director of mortgage sales at real estate investment fintech company HomeAbroad. The penalties don't stop with a single fee, though. "[They] stack up fast if you keep missing payments, making it harder to catch up," Glick warns. Most lenders allow a grace period of five to 15 days after the due date before applying these charges. But you'll also receive notices urging you to pay immediately. Explore your HELOC and home equity loan borrowing options today. Damaged credit score "Payments that are 30 days or more past due will result in negative credit reporting, which can lower your credit score and impact your ability to secure future financing," cautions Calixto. The impact can be severe. Glick notes that one missed HELOC payment can drop your FICO score by 50 to 100 points or more. The situation worsens if you're 60 to 90 days late, as this is when lenders might flag your account as "delinquent," according to Glick. During this time, the lender often takes further action, including freezing your credit line access and increasing communication through calls and formal notices. Default risk "Repeated late payments of 30 days or more may lead to default," Calixto warns. At this stage, "[your lender] can demand the full balance immediately," Glick says. This sudden requirement to repay the entire loan balance, rather than just making up missed payments, creates a financial crisis for many homeowners. Foreclosure risk Foreclosure is the most serious consequence of HELOC default. The exact process and timeline vary from state to state. But generally, if your payment is more than 120 days late and you ignore notices from the lender, they'll warn you about losing your home. Next, they'll file a notice of foreclosure. As the borrower, "[you get] a small period to redeem the loan," explains Dean Rathbun, executive vice president at United American Mortgage Corporation. "If [you don't] redeem the loan, the lender will have the right to foreclose." Cross-collateralization complications "If your HELOC is with the same lender as your primary mortgage or tied to loans through cross-collateralization, missing HELOC payments can put your other financial agreements at risk," warns Glick. He describes this relationship as "a web of obligations" where your home is collateral for several loans. The implications can be far-reaching. For example, falling behind on HELOC payments might cause your lender to flag your mortgage account even if you're current on those payments. According to Glick, "they could restrict modification options for your primary mortgage, or, in rare cases, declare a default on both loans since they're tied to the same collateral." What to do if you're having trouble with HELOC payments The experts we interviewed recommend taking these steps if HELOC payments become unmanageable: Contact your lender right away: "They may be able to defer payments or work with you to modify payments if you've come into a time of struggle. [So] don't hide and ignore your debt," Rathbun says. "They may be able to defer payments or work with you to modify payments if you've come into a time of struggle. [So] don't hide and ignore your debt," Rathbun says. Request forbearance: "If you're facing a short-term issue (e.g., job loss), request a three to six-month pause," recommends Glick. "[This] buys you time to stabilize without immediate credit damage." Interest may still accrue, however. "If you're facing a short-term issue (e.g., job loss), request a three to six-month pause," recommends Glick. "[This] buys you time to stabilize without immediate credit damage." Interest may still accrue, however. Explore payment plans: Glick encourages asking your lender if it's possible to spread out missed payments or switch to interest-only payments. The bottom line HELOC rates remain lower than other borrowing options, typically several percentage points below credit cards or personal loans. This advantage comes from being secured by your home, but that same security means the stakes are higher if you miss payments. "If you're having trouble making a HELOC payment, start by taking a close look at your budget," advises Calixto. "Cut back on spending wherever you can to free up money for your payment." She recommends prioritizing essential payments and getting help from your HELOC lender. The sooner you reach out, the more options you may have.
CBS News
09-04-2025
- Business
- CBS News
Comparing HELOC and home equity loan rates now: What experts say borrowers should know
Home equity line of credit (HELOC) and home equity loan interest rates have been trending downward in 2025 , creating valuable borrowing opportunities for homeowners in an otherwise high-rate climate. That means homeowners have a couple of affordable options for tapping into their home's equity right now. Before deciding between the two, though, it helps to understand each option clearly. HELOCs currently offer lower starting rates but because the rates are variable, they can change over time. Home equity loans lock in fixed rates for the entire term. As a result, your choice between the two could save — or cost — you thousands, so it's important to understand how to compare the rates on these options before making a decision. Start comparing your home equity borrowing options online now . Below, mortgage experts explain how today's home equity borrowing options work, what's driving current rate trends and which factors impact your total costs. HELOC rates are lower than home equity loans because they're tied to the U.S. Prime Rate, which follows the Federal Reserve's actions, experts say. "Borrowers are still feeling the benefit of the Fed's three rate cuts in 2024, which lowered rates by a full percentage point," says Debbie Calixto, sales manager at mortgage lender loanDepot. These cuts have made HELOCs especially attractive for homeowners tapping their equity. Home equity loans, on the other hand, follow a different pattern. "[They're] fixed-rate, so they don't budge as fast," says Steven Glick, a licensed mortgage loan officer and director of mortgage sales at HomeAbroad, a real estate agency. Long-term bond markets and broader economic forecasts drive these rates instead of immediate Fed decisions. Lenders also build in a premium for the rate stability that home equity loans provide. This makes them more expensive upfront, but protects borrowers from future rate increases that HELOC users might face. Find out what your home equity borrowing rate could be now . "I don't see home equity loan rates slipping below HELOCs this year," says Glick. "The Fed's hinting at a couple more rate cuts, but nothing drastic. Inflation's hanging around 2.7%, and jobs are still solid." Since HELOCs respond to Fed changes, they'll maintain their rate advantage if these cuts materialize. Ari Rastegar, CEO of real estate investment firm Rastegar Capital, agrees with Glick's forecast, saying it's unlikely home equity loan rates will fall below HELOCs in 2025. "HELOC rates are nimble, adjustable and built to move," Rastegar says. Fixed-rate home equity loans move more slowly because lenders factor in long-term economic predictions. "Besides market conditions, your financial profile plays the biggest role in determining your rate and how much equity you can access through a HELOC or home equity loan," says Calixto. To assess risk, lenders examine your credit score , debt-to-income (DTI) ratio and current mortgage balance. Generally, higher risk means higher rates and potentially smaller loan amounts. The impact on your costs can be significant. "If your credit's stellar — say, 740 or higher — you're likely getting the lowest rates, maybe shaving half a point off the average," notes Glick. "A solid DTI, under 43%, tells lenders you can handle the payments, so they'll offer better terms." Borrowers with weaker profiles might still qualify but may pay 1% to 2% more in interest. Experts recommend evaluating the total cost of the loan before choosing a home equity product. Here are the key costs to watch for: While HELOCs currently feature lower starting rates, they come with uncertainty. "With a variable rate, there's always the risk that your rate could increase over time, along with your monthly payment," Calixto cautions. In contrast, a fixed-rate home equity loan keeps your payments predictable throughout economic shifts. But both options come with unique benefits and use cases. So, before committing to one, Calixto advises consulting a trusted mortgage professional to discuss your options and gain clarity around fees. They'll help you look beyond today's rates to find a good balance between immediate savings and long-term financial security.
