Home Equity Loan

adjustable rate vs fixed 7.57% home equity loan?

I have a fixed rate 64000 line of credit at 7.57%. With the resent rate decrease the adjustable rate I can transfer it to is at 5.8%. Tuesday they may lower it .5 - 1% more. Would it be worth transfering it to adjustable rate. I would save around 100 a month on interest that I would apply to the principle. Also how long will the lower rates remain and would they increase it slowely so a person would be able to relock in at a lower rate? right now I see a 1.77% difference. That might just up to 2.77% on Tuesday. I would save 145 a month. I would apply it to principle.

Public Comments

1. You cannot be certain that your rate will remain low (adjustable rate). If you have any uncertainty about the reliable and secure flow of income stream in the future then this is really high risk.
2. 7 is right about the risk. today that variable rate may look really rosie, but down the line it may skyrocket out of control - one of the main reasons there are so many foreclosures now. the best way to budget is to know exactly how much is coming out of your pocket every month - no surprises.
3. Bankers want you to fix your eyes on the percentage. But we dont do business in percentages. We do business in dollars. A home equity loan at your current rate isnt bad. What I would recommend is paying more per month on the loan you currently have. Remember, you will probably have closing costs associated with the re-fi. That will most likely eat away your savings. Just pay more per month. If you pay next months principal along with this months payment, you eliminate next months interest.