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sia101009 · Joined: 10 Oct 2009 Posts: 17 0.06 Dollars($)

my question is about ajustable rate on a Line of Credit. We are able to start at 4.04% how fast and how far can we expect the interest rate to jump.

gmakerley · Posted: Wed Oct 28, 2009 10:27 am Post subject:

the documentation you received from your lender will have all this information. without access to that particular transaction, it's virtually impossible for any of us to predict what changes may take place, how often and how drastic.

if you don't have copies of the documents you signed, you need to go back to the lender and obtain them. if you don't understand them, have the lender go through them again. if they don't feel confident enough in their own documentation to explain them fully, find a lawyer or other financial expert you trust and get an explanation.
frankly, it ought not be difficult to figure out the answers to your questions, armed with the proper paperwork.

jveenstra · Posted: Wed Oct 28, 2009 11:04 am Post subject: ARM Rate

Home Equity Lines of Credit (HELOC) have a rate that is usually based on the PRIME RATE plus or minus a margin. The PRIME RATE right now is 3.25. If you can get a rate of 4.04, it may mean your rate is based on the PRIME RATE plus a margin of .79. That means your rate will always be .79 higher than the PRIME RATE. (This is assuming that you do not have a teaser start rate that is not based on any hard and fast mathematical formula of prime rate plus a margin)

That leaves the question: How fast can the PRIME RATE go up or down?
No one can answer that.

The PRIME RATE was 4.25 on 12/10/02; it was 5.25 on 12/14/04; it was 8.25 on 05/10/06; it was 7.25 on 098/18/07; it has been 3.25 since 12/10/08.

The Federal Reserve Open Market Committee meets every six or seven weeks and determines if they will raise rates or leave them the same or lower them (They actually raise or lower the Federal Funds Rate; they do not control the PRIME RATE; banks each control their own PRIME RATE; banks almost always raise or lower their PRIME RATE by the same amount the FED raises or lowers the Fed Funds Rate)

The Fed raises the rate to control inflation. The question is: When will inflation kick in and cause such concern in the Fed that they start to raise rates?

No one knows, however, one of the concrens is that all the money the Fed is spending right now could lead to massive inflation. In that cas, your HELOC rate may rise rapidly. There are others who say inflation will not be so bad for quite a while.

Whenever you talk about the future, many have an opinion, but, no one knows until we get there.

gmakerley · Posted: Wed Oct 28, 2009 11:12 am Post subject:

great finishing touch there, john...i might amend it to "everyone" having an opinion (and most of them wrong), but it's right on the money.

marga1511 · Joined: 13 Nov 2009 Posts: 42 0.02 Dollars($)

Adjustable rate loans benefit many consumers.But risk is there for people who enter adjustable loans without fully understanding their obligations. The payments on an adjustable loan can increase significantly during the life of the loan, so if you would struggle making the introductory payment, you should probably consider other options.

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