Home Equity Line Of Credits Question
I am planning to do a home equity line of credit at prime (4% current) + 0%. I will use that to build a new house then rent it. It would sure beats the current purchase of a new home now aday.
My broker is telling me to, after the new home, do a first again to combine my current 1st with the line of credit. But with the rate climbing, do you think it is wise. Or do I just keep the prime+, which will be at 4%. :-?
If you have a HELOC for 4% - I find it hard to believe that you will be able to find a fixed rate mortgage that is lower than than - or even at that 4% mark! Keep your Heloc!!
Just my 2 cents!
Good Luck!
[addsig]
HELOC is tied to the prime. So it is 4% now but will rise as Fed raises short-term rates, which it did yesterday. But if its always prime, it is not a bad deal. The question is how long will it take for the variable rate (HELOC) will catch up to the fixed rate (based on long rates) that we see in the market today.
After the home is built I would try to lock in as low of a fixed rate as possible. Even if this is 8% and the numbers work you are alright.
After that you will have access to your HELOC and can use it again on another property!
Would you rather make $1000mo on one property or $750/mo each on two?
To my knowledge, lines of credit aren't usually fixed. In fact, I've never seen one that's fixed. They're adjustable. That's why the rate is prime or libor.
Equity loans, on the other hand, are a fixed product, with rates at roughly 7%.
I'd check the terms and conditions of that HELOC again.
[addsig]
Quote:
On 2004-07-01 09:46, ahmedmu wrote:
HELOC is tied to the prime. So it is 4% now but will rise as Fed raises short-term rates, which it did yesterday. But if its always prime, it is not a bad deal. The question is how long will it take for the variable rate (HELOC) will catch up to the fixed rate (based on long rates) that we see in the market today.
Prime rate change yesterday? Where do u go to this stuff?
Thanks all for your replies... :-D
As forecasted, the Federal Reserve raised the prime rate or over-night lending rate yesterday by 25 basis points, or .25.
Therefore, the prime rate, which was 4, should now be 4.25 going forward.
http://www.bankrate.com/brm/ratewatch/leading-rates.asp
[addsig]
Fixed rates have gone up in the last few months, but they are still at historic lows. With high prices of energy, global instabilty and growing federal and trade deficits, there is a risk of high inflation and high rates. Economic recovery may falter, oil price may come down and inflation may still be subdued because of low-cost production in countries like India and China, but being a conservative person, I have taken fixed rate mortgages in properties I would like to keep for a while.
Quote:
On 2004-07-01 09:49, monkfish wrote:
To my knowledge, lines of credit aren't usually fixed. In fact, I've never seen one that's fixed. They're adjustable. That's why the rate is prime or libor.
Equity loans, on the other hand, are a fixed product, with rates at roughly 7%.
I'd check the terms and conditions of that HELOC again.
Lines of credit can be fixed or adjustable. Bank One line of credit is score driven but you get the option of fixed or adjustable. They go to 100% LTV
Lori
[addsig]
You can also 'lock' your HELOC rate, effectively changing into a fixed rate loan, if you plan to hold awhile. Trouble is, when you choose to fix the rate, it won't be at the low HELOC rate, rather at a point or two or more higher, and you may pay a lock fee.
I'm in the process of switching my HELOC over from Wells Fargo to my local Credit Union that's just started offering HELOCs, they're non-profit and offer better rates and service.