Help! should I lock in my HELOC????
Ok – I’ve asked this before, but my father (w/background in finance) told me the day before yesterday I should lock in my Heloc ASAP because there was going to be huge inflation and and rates were going to go way up. Indeed, I called today and lock in rates have jumped from 8.6 to…
Ok – I’ve asked this before, but my father (w/background in finance) told me the day before yesterday I should lock in my Heloc ASAP because there was going to be huge inflation and and rates were going to go way up. Indeed, I called today and lock in rates have jumped from 8.6 to 9.35 – does anyone have any differing opinion on this? or is it pretty much a given that I should lock in before rates go through the roof. (it would raise my monthly payments by about $500 a month)
a heloc is a line of credit,
payemnts on helocs are usuallt interest only for the entire draw period which usually lasts ten years, and interest is only due on the part of the line that has been drawn, so if you are not using the entire line or plan on repaying part of the line back dont lock in a fixed rate, becasue by locking it in it will become tougher to payoff if you get a bonus or know you can pay it down shortly.
all the best
benjamin
Seriously. Why aren’t you paying 4% on your heloc? You should be at prime – .25% at the most.
Remember a HELOC is adjustable. Whatever rate you lock in at is only temporary. If its going to go up, its going to go up even after you lock. Besides, where are you getting 9.35% heloc rates? Is your LTV high? sunny_hong@countrywide.com
Hang on for a second here.
I assume you have an adjustable rate HELOC right now, and are concerned that rising interest rates will raise your payments. First off, it is by no means certain that “there was going to be huge inflation and and rates were going to go way up.” This is possible, but its one scenario of many, and in my opinion quite unlikely. HELOC rates are usually pegged to the Prime Rate, which moves in line with changes in the Fed funds/discount rate. If the Fed starts raising rates, then your payments will rise. If they do not, your payments would stay the same. Given what’s going on with the economy and the housing market, I seriously doubt rates will rise. Right now, the market predicts no move in October. See this link for more information: http://www.clevelandfed.org/Research/data/Fedfunds/index.cfm on future fed policy changes.
Given that situation, my advice would be to not lock in at a much higher rate. You seriously mean to tell me you are contemplating spending an additional $500 a month to make sure that your HELOC rate isn’t jacked up by 4 percentage points in the near future? At the very least, you might want to wait until rates start going up to lock in. Right now, the next move is likely down, which will benefit, not hurt you.
Yes, inflation is a long term concern, and a significantly great concern than it was two years ago, when oil was at $60 a barrel and everyone thought THAT was alot. It’s not anywhere close to a $500 a month concern, though, and if it starts looking that way, you’ll have plenty of advance warning.
I don’t know what rates you checked or what your credit situation is, but bankrate.com – a place you should definitely check out – shows a $30K HELOC for NYC customers with a “GOOD” credit score offered at between 5 and 7%. That sounds about right to me….