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Oh boy, oh boy.  The cost of credit is going up (again).

The Fed is widely expected to raise its benchmark Fed Funds Rate to 3.75% today and that's bad news if you have a "first lien HELOC", a popular mortgage product popular from 2003.

First lien HELOCs are lines of credit that serve as a primary mortgage.

When Prime Rate was 4.000%, first lien HELOCs were an attractive mortgage product for a certain class of homeowners.  They provided the flexibility of a traditional home equity line of credit, and the low cost of a Prime Rate-based loan.

At 6.750%, Prime Rate is no longer "low cost".

Holders of first lien HELOCs would be well-served to remortgage into a new loan with lower monthly carrying costs -- maybe a 3-year ARM with interest only options, or something different depending on the overall financial picture.

Regardless, with long-term mortgage rates sitting below Prime Rate, the first lien HELOC is a mortgage product whose time appears to have passed.  And you don't have to be a Harvard student to figure that out.

Dan Green is an active loan officer. Email or call 513-443-2020. Dan is on Twitter at @mortgagereports.