When choosing your home equity product, you have two basic options. You can choose an adjustable rate or a home equity line of credit with fixed rate option. Both of them have their advantages and disadvantages. If you are unsure of where the market is headed or how your financial situation will change in the years ahead, I would recommend a home equity line of credit with fixed rate option. That way you can have consistent payments over the life of your loan. There are two basic criteria that you need to consider when deciding if a fixed home equity loan is right for you.
1. How long you plan to stay in this home? If you plan to stay in your home for the full 30 years, then you may be better off sticking with a fixed home equity loan. That means that you will have the same interest level for the entire life of the loan. If you plan on moving before the loan matures, you may be better off going with an adjustable rate loan because you often get lower initial interest rates.
2. Your comfort level for risk? If you are uncomfortable with risk, then a home equity line of credit with fixed rate option is for you. No matter what the economy does, you can rest assured that your mortgage payments will not change. If you like to take a chance or you feel that the economy will get better in the next few years; you may want to take an adjustable rate mortgage to take advantage of the lower rates.
The choice is up to you, and do not let a lender convince you that one product is better for you than another, if you feel otherwise. You may be able to find a home equity line of credit with fixed rate option that can convert to an adjustable rate, or vice versa.
Kathie Stillows has decided to reveal all her secrets about home equity loans. Click here for the latest tips and tricks. |
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