Prime Hit 7%: Reprice the Debt You Already Own

The prime rate rose to 7.00 percent on September 17. Fixed-rate loans did not move. Draw lines, HELOCs, and indexed bridge debt did. Here is the math.

Re:InvestorHub Team · 2026-09-24 · Rehab & Projects

The Federal Open Market Committee (FOMC) raised the federal funds target range by a quarter point to 3.75 to 4 percent on September 16, 2026, by a 12 to 0 vote. Banks passed it straight through: Bank of America lists its prime rate at 7.00 percent, effective September 17, up from 6.75 percent. If you carry floating-rate debt, such as a home equity line of credit (HELOC), a rehab draw line, or a business line of credit, your interest cost rose last week without anyone asking you. If your debt is fixed, nothing changed. This post shows which is which and what the move costs on a mid-rehab draw line.

Which of your loans actually float with the prime rate?

The note decides, not the loan label. The prime rate is a reference point that each bank sets for itself, and Bank of America says it may price loans at, above, or below it. Lenders that index to prime reset your rate to the new prime plus your margin, a fixed number of percentage points the lender adds. Here is how the common investor instruments sort out.

• HELOCs. The Consumer Financial Protection Bureau (CFPB) says home equity lines of credit typically carry variable rates, and that on a variable plan your monthly payment can change even if you do not draw more money.
• Business and personal lines of credit. Priced at an index plus a margin, commonly prime. The CFPB lists personal lines as typically variable.
• Construction and rehab draw lines. Many are indexed to prime or to the Secured Overnight Financing Rate (SOFR), a short-term benchmark that follows the Fed policy rate. Interest accrues on the drawn balance, so cost rises as draws fund.
• Bridge debt priced off an index. Same mechanics: index plus margin, reset on the schedule in the note.
• Fixed-rate mortgages and many hard money loans. These carry a fixed note rate, so the September 17 move changed nothing. Confirm this in your loan documents rather than assuming it; some hard money lenders index their rate.

How much does one 25 basis point move cost on a draw line?

Here is a hypothetical example. You are mid-rehab with $150,000 drawn on a line priced at prime plus 1.50 percent, interest-only. One basis point is 0.01 percent, so 25 basis points is a quarter of a percentage point.

• Before September 17: prime 6.75 percent plus 1.50 is 8.25 percent. Interest is $12,375 a year, or $1,031.25 a month.
• After September 17: prime 7.00 percent plus 1.50 is 8.50 percent. Interest is $12,750 a year, or $1,062.50 a month. That is $31.25 more per month.
• If the second hike lands: prime 7.25 percent plus 1.50 is 8.75 percent. Interest is $13,125 a year, or $1,093.75 a month, which is $62.50 a month above where you underwrote.

Over a six-month hold at the full balance, carry goes from $6,187.50 to $6,375.00 after one move and $6,562.50 after two. Those are small numbers, and you should not let anyone tell you otherwise. The exposure is rate multiplied by time and by balance. Stretch that hold by three months at 8.75 percent and you pay another $3,281.25 in interest. Double the balance and every figure doubles. Rehabs that slip past schedule are where a small rate move becomes a real line item.

Why does the signaled second hike matter more than the first?

It matters because your hold period is long enough for it to land. CNBC reported that in the Fed's updated projections, 16 of 18 participants expected another increase later this year, and four of them saw two more. Chairman Kevin Warsh did not submit a projection. For 2027 the group split: eight officials pointed to another hike, six to holding steady, and four to cuts.

This post does not forecast where rates go from here; Three Dissents and a Hold covers why waiting on a cut is a weak plan. For a draw line the practical read is narrower. A rehab that closes in five months can see another reset before it sells, so underwrite the carry at the current rate plus one more step.

What should you re-underwrite on a mid-rehab draw line?

1. Pull the note and find the index, the margin, the adjustment frequency, any floor or cap, and when the draw period ends. The CFPB tells HELOC borrowers to learn exactly these terms, and the same list applies to any indexed line.
2. Rerun your holding costs at the current rate, then at plus 25 and plus 50 basis points. Use the actual drawn balance schedule, not the full commitment, because interest accrues only on what you have drawn.
3. Multiply by delay. Take your scope-of-work schedule and add the usual slippage. If your contingency line already covers a 30-day slip, check that the interest on that slip is inside it. The 18 percent contingency rule shows how to size that cushion.
4. Quote the line the way the note prices it. A draw line is priced as prime plus a margin, not at the headline mortgage rate, and Why Your Rate Is Higher Than the Headline Rate explains how quoted and paid rates diverge.
5. Check the exit separately. If you plan to refinance into long-term debt after the rehab, that rate is not your draw line rate. Stress-Test Your BRRRR Exit at 7.5% walks through that second underwriting.

Run the check on every floating balance you own, not only the rehab. A HELOC you used for a down payment last year reprices on the same day as your draw line, and it pays interest every month whether or not a project is active. Ask a mortgage professional or attorney about any change to loan terms before you sign it; this post describes mechanics and does not replace that advice.

What is the takeaway?

Prime moved from 6.75 to 7.00 percent on September 17, and every loan indexed to it moved the same day. List each floating balance you carry, write down its index and margin, and recompute the monthly interest at the new rate and at one more 25 basis point step. On a $150,000 balance that is $31.25 more per month today and $62.50 if the next hike arrives. Put those figures into your hold-cost line before the next draw, not after the next statement. The Fix & Flip Calculator takes about two minutes to rerun with the new rate, and Lenny, the financing coach in the AI Coach, can walk you through the terms of a note.