Rising Interest Rates? Time to refinance your HELOC.

Just last week, one major news outlet reported that consumers who enjoyed rock bottom introductory rates on HELOCs just a few months ago are now paying double-digit rates. That's because interest rates, in general, have gone up considerably. As introductory adjustable rates on home equity lines of credit expire, the new rates-and their corresponding monthly payments- will kick in. To avoid getting kicked in the seat of the pants (and in the wallet) by your HELOC, you could refinance to a more appropriate equity loan while there's still time.

HELOCs and prepayment penalties

Home equity lines of credit sometimes charge a penalty if you pay them off early; but the fees will, most likely, be offset by the savings you'll gain by switching over to lower fixed rates. If your loan carries prepayment penalties, calculate the amount that you'll need to pay and then compare it to the amount you'll save.

If the penalty is $500, for instance, and you can save $1,000 within the first year by converting to a cheaper fixed-rate second mortgage, you could recoup the price of the penalty in six months' time. Within one year, you'll have made back enough to pay for the penalty, and put an extra $500 into your piggy bank.

Trim the fat off a second mortgage

Also keep in mind that mortgage lenders will often waive certain fees in order to gain or retain your business. If you plan to take out a second mortgage, ask your lender to trim off as many expenses as possible. Trimming the fat from your closing costs can add up to significant savings, at a time when all of us want to do a little belt-tightening.