Hello wise mustachians!
My father passed away in November and, since then, I have been working with my step-mom to get a handle on her financial situation. There have been lots of moving parts and layers to unfold, but we are getting things done, piece by piece. I have a question that I thought may be appropriate for this forum and am hoping to find a great answer/resource.
Her house is paid off, but they did have a HELOC in place where they borrowed money to put into a business. The balance is about $150K and she is currently making interest only payments. Unfortunately, there is a variable interest rate on the line and she is concerned, and rightly so, about that interest rate increasing and making her payment even higher per month.
We've been working on paying off her credit card debt and this HELOC is a real head scratcher for me. Obviously, it would be a better situation if her payments were, at least to some degree, going toward the principal. She is considering refinancing the debt into a mortgage that would lock in an interest rate to hedge against her monthly payment increasing over time. This would also allow her to slowly pay down the debt instead of her current situation of paying interest only.
What say you? What would you all do in this situation? Where should we look? I'd obviously like to find the best rate/terms possible, but I'm also interested to hear what strategies might be applied to this situation. Any advice helps. Thanks so much!