Should I lock the rate on this HELOC?
March 4, 2009 3:28 PM Subscribe
Financially talented MeFites, please tell me whether I should lock the rate on this HELOC.
Okay, I will try to lay it all out here, but I may miss something--I'll stay close by to provide any additional information that may be needed.
I have a HELOC that works like this: for the first ten years, the line of credit stays open, and I pay interest only. The interest floats but has a floor of 4.0% (keyed to the prime rate), which is what it is at today (my payment is $78.86). My payment will never be lower.
At any point I can lock the rate, at which point it will convert to a 15-year fixed mortgage, and the rate will be calculated thusly: 3-year T-bill rate + 4% + .5% margin. So if I lock today, my rate will be 5.92%, and my payment will be $215.53. There is no floor for the rate lock.
I know nothing about this type of thing. Is the 3-year T-bill rate likely to go lower? Is the prime rate likely to stay where it is? Should I just go ahead and lock now?