Tuesday, 25 January 2022
By Mortgage Outlet
This is What a Rate Hike Will Cost Homeowners The Globe and Mail
Someone with a HELOC balance of $142,000 at an interest rate of 2.7 per cent would see their monthly payments of principal and interest inch up from $650 to $668, a difference of $18 a month, or $216 a year, according to LowestRates.
Still, several factors might soften the short-term financial blow of rising rates even on borrowers with variable-rate debt. For one, not all variable-rate mortgage holders will feel the pinch of higher rates right away, says Leah Zlatkin, a mortgage broker at LowestRates. Many of her clients have variable-rate mortgages that keep payments steady – up to a certain threshold – even as the interest rate moves up. Instead, borrowers will see their amortization period extended in response to higher rates, meaning it will take longer to pay off the loan.
HELOCs, for their part, allow consumers to make interest-only payments, a feature that can provide some breathing room to financially stretched borrowers.
