Consumption and Real Estate
Is it better to keep an adjustable rate at 9% home equity loan vs. a fixed rate at 6% ?
Question : Is it better to keep an adjustable rate at 9% home equity loan vs. a fixed rate at 6% ?
The adjustable rate has been as low as 5%, the plan we have can have the loan paid off in 3.5 years. Would it be beneficial to change to a fixed rate at 6% now, because of closing costs and fees?
fixed rate home equity loan
Best answer:
Answer by Ben
NO. get the 6% fixed
Even if rates do drop a bit they arent going to drop by much maybe .25 – .5 in the short term future. (speculation for .25 at next fed meeting). So your adjustable will sill be 8.5 or so. Thats quite a big different in interest vs 6%, should be enough to cover closing costs.
Just take an approximate closing costs vs the added cost of 2 -3% extra interest. If closing costs are higher keep the adjustable otherwise take the fixed
-
-
#2 written by oakhill 1 year ago
If you can pay off the loan in only 3 1/2 years, the extra expenses of changing to a fixed rate loan may well not be worth the effort. If you had 20 or even 30 years to go, then a lower rate fixed loan would be the best option. However, since you apparently do not have many payments left, and since adjustable rates are not likely to go significantly higher soon, you may be best off just continuing with the adj. loan. As others have noted, if you want to do all the arithmetic, and know all the costs of changing loans, then you can calculate the difference. Again, for only 42 months, it is probably not worth the effort or expense.
-
#3 written by slim69shady2002 1 year ago
I would take the fixed rate at 6%.
Although I dont know all the details on the closing fees. I dont think that you want to give ALL your details on yahoo answers. I hope you are good at math, because it really comes down to the other fees. At the bank I work for, we wouldnt charge you to convert it to a fixed rate no matter how long you have had the line for. That doesnt do you any good now, I was just letting you know for your information.
- Comment Feed for this Post
Interest rates won’t be dropping enough for you to get 5% for a very long time. I would say– go for the 6% fixed! It won’t get much better than that any time soon!