10 year loan; prime + .25 or 7.75 fixed, What would you choose?

[musiclawyer]

Given the state of things now, assuming you'll use all the money, you're disciplined, and it's a relatively small amount of money likem, say, 25K (through a home equity line of credit or a 2nd.)

[Vincardog]

1. Fixed prime is going over 15% soon

[cally]

2. I'd choose fixed

If rates change, you can always re-finance. I think rates are historically low and I think everyone should lock in the low rates if they can.

[amazona]

8. yes but 7.75 percent is NOT low, it's a rip-off

I'm assuming from his comment about being "disciplined" that he has good credit. Surely he can do better than 7.75 percent.

[BrklynLiberal]

3. I would take the fixed. Interest rates are due to go up...fast and soon

[GOPisEvil]

4. I like the sound of fixed, you can always refinance later.

[I_Make_Mistakes]

10. Take it from a burned mortgagee

I bought in 89, (highest price, highest rate 10.5%). Then the bottom dropped out and couldn't sell for near the price that I paid.
They were selling for 20K less, (two years later).

Once you purchase for x amt of $'s, you are locked in to that amt, however, interest rates, they fluctuate. I swear that I am the only person, I know, that has benefited long-term from an ARM, (currently, at 3.75 %, with a max increase, 2%/year), hope, I can get out this time.

When the rates increase, the property values have to go down, because x dollars = x dollars. You either pay it in the rate, or in the price. It is the general deal, when rates are low, selling prices are higher, when rates are higher selling prices are lower.

I messed up royally. Do not follow my mistake. The rates are going to soar, sell now when prices are high, bank the money and rent, buy, when the prices bottom, even if rates are high (then refinance when they bottom).

PS I worked in systems for a mortgage company for a couple of years., so, I know more than others, outside the field.

That's my plan and my advice.

[tjwash]

5. Take the fixed every time.

nt

[boneygrey]

6. Go with the fixed unless

you think you are likely to pay it off sooner than 10 yrs. Inflation is on the horizon and the dollar is weak so rates will have to go up. The big question is if you can pay it off sooner, what will rates do during that time frame?:shrug:

[amazona]

7. well I'm the dissenter here I see

7.75 is way too high of interest to be paying if you have good credit. Sheesh. For less than that, I could put it on credit cards!

http://www.forecasts.org/prime.htm

I would take the prime plus 0.25 IF there was no pre-payment penalty.

I would be astounded if the prime went up very fast any time soon. Check the 5 year CD rates. They don't suggest investors believe the interest rate is going anywhere.

Why do people believe the interest rate will rise very high? If it does, what little recovery we have will die on the vine.

On Edit -- If you are VERY disciplined you can do what I did. I borrowed an amount in the mid five figures and kept rotating it around "introductory offers" on various credit cards, so that I never paid any interest, just principal. Then, when I was having good fortune in my career, I just paid it off. But you need to be VERY well organized to do this and keep track of when your various "zero percent" offers are running out. You also need to keep those checks that allow you to transfer balances without paying any balance transfer fee. Unfortunately, this only works if you are perfectly well-organized; slip up, and you could pay high fees or interest. But it was a life-saver for me. And it is always better to have unsecured credit than to borrow against your home, because in bankruptcy your home is protected, so you would want more equity in your home, rather than less -- this last part depends on what state you live in though.

[Shakespeare]

11. "Why do people believe the interest rate will rise?" Seen this headline?

Fed Minutes: Rates Likely to Keep Rising

(Which is a change, because when the story first posted, the headline said that the Fed knew last month that they hadn't raised rates high enough last time around; more protecting Bush's economic joke agenda)

http://story.news.yahoo.com/news?tmpl=story&cid=509&ncid=749&e=6&u=/ap/20050104/ap_on_bi_ge/fed_minutes

[GOPisEvil]

12. It's high for a 30 year mortgage, but is it too high for a 10 year?

[amazona]

13. yeah promises promises :-)

Now that I'm no longer a creditor I'm afraid I've gotten rather weary of Greenspan saying that one day, pie in the sky when I die, he will raise the rates to where I can get a decent income on my savings again!

[amazona]

14. well I think it is but I'm very tightwaddy

The variable rate at ingdirect.com (the orange Dutch bank) is 5.25 percent.

http://home.ingdirect.com/products/products.html

I only use them for savings and CDs but I haven't heard any complaints about their lending practices. I saw their bank building skyscraper in Amsterdam so I know they are a "real bank" and not just an internet phenomenom.

7.25 percent just sounds too high to bother to lock it in to me, who knows.

[GOPisEvil]

16. OK...it sounded high to me, too.

But, I am judging on my own 30 year mortgage.

I was worried about ING, but nice to know they are a "real" bank! Cool!

[Lex]

17. 5.25 is for the *variable* rate

so 7-ish for the fixed sounds about right.

[Zomby Woof]

9. Fixed

The average over the next 20-30 years is bound to be higher. Take the odds on this one.

[Lex]

15. Home Equity Loans are always at higher interest rate than 1st mortgages

.
although I'm not sure what the going rate is right now for fixed Home Equity loans--I think around 5.99 to 6.99 or so, for fixed.

What I'd do is go with the Prime + .25, and put yourself on a repayment plan so that you have it paid off in a relatively small amount of time.

The short term interest rate probably won't sky-rocket overnight, but will probably climb gradually over time. By the time prime + .25 catches up to 7.75, you'll have paid the loan off anyway.

Cheers!

[I_Make_Mistakes]

18. I left to google interest rates

Then I said that is not my job (not too be mean). There are too many interest rate factors, that only you would know (debt to equity ratio, credit history, outstanding debt, % of down payment to loan (ltv), etc.)

Interest rates are going to climb. They are. I didn't mention, my first fiance and I were buying a house in the early 80's. and the interest rates were mis-teens. We actually thought, 14.5%, was good.

They told us, that we had gotten in the pre-recession price increase on building materials. I was also a co-op student, working for a specialty steel company, that year. We were cost justifying a 400 million dollar expansion, that turned into a billion, during that time frame.

Oh, by the way, it was the early 80's, anyone, get the connection?

I sure as HECK didn't, the REPUKE, that I was!

[musiclawyer]

19. I'm kind of with the minority here

Got perfect credit. I'm inclined to go line of credit and pay it off in 7 years. So I might go adjustable. I would think in 7 years prime is up at about or over 7 %