| Switch to a variable interest HELOC? |
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LCW47
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| Switch to a variable interest HELOC? |
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I currently have a second mortgage (home equity loan) of $38,000 at 6.75% fixed rate (30-yr.) I have the option to move this money into an interest-only variable rate HELOC - currently the rate is 3.25%. My plan would be to pay the interest plus extra principle (there is no penality for paying extra principle).
Is switching to a variable rate too risky? I have no idea how rates work and how quickly they could rise.
Our home value is about break-even right now (mortgages vs. value), given the drastic decline in real estate values.
Thanks for any advice!
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Wed Mar 11, 2009 10:38 pm |
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littleroc02us
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Personally I would feel more comfortable leaving it where it's at and paying every cent to it until its paid off. It's only $38,000. Sounds like you have extra to apply to principle so if you go after it with Gazelle intensity you'll have it paid off in no time. The word variable scares me, just look at all the people who are forclosing that had them.
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Thu Mar 12, 2009 1:33 pm |
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LCW47
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Cash: $ 0.45
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No offense taken, coaster 
I do have extra to apply to principle, so my theory is that this extra $$ would go further if the interest rate were lower than 6.75%.
Does a HELOC work just like a credit card? Could the rate jump 10% overnight as is happening with some credit cards? If that happened, wouldn't it create an even bigger housing market disaster, for those who still have ARMs? Is the rate solely up to the bank's whim?
Thanks again for your expertise and pardon my ignorance - that's why I'm asking! 
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Thu Mar 12, 2009 4:10 pm |
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