i want your opinion

justAndy

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i have a "Prime" mortgage. It's @ 3.15% right now, but if the Prime Rate goes up, my interest goes up, but capped @ 9.5%.
I can get locked in @ 4% but i have a debt load that is too high by EXACTLY what my reserve in checking is.
It would be great to lock in for the next 24 yrs, but then my reserve is zero.
Lock in?
Hang back and wait til it goes up a bit?
Something else?
 

Folster

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If you wait for your adjustable rate to go up before locking into a fixed rate, the fixed rate that will be available will also be higher. From what I have read and heard, interest rates are expected to stay low until 2014-15, but not even the Fed can completely control that. Locking into 4% for the next 24 years would be great, but is that worth exhausting your emergency fund? I would buckle down in the next few months and scrape together a couple extra months worth of savings (maybe sell some stuff) and lock into the fixed rate. I'd rather be a little early locking in than a little late.
 
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Gaddabout

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I know of very few people who don't think rates are going up. Soon.
 

jefftheshark

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I am in the camp that thinks rates won't be going up soon.

The Fed is pouring everything it has in an effort to keep interest rates down, To do otherwise at this point in time would risk a government implosion that is near unimaginable in scope. So what would be the trigger for interest rates to go up? There is no bond vigilante like there would be under normal circumstances because in this case the Fed is the market. China stopped buying our debt years ago and yields went unchanged. As long as the Fed is in control of the printing press, who will stop ZIRP?

Everytime there is a hint of QE pausing, the markets take a swoon. When the markets drop, the dollar gets stronger and bond yields go down, not up. When dollars are pumped into the government coffers, where is the money parked? In long dated treasuries for the most part - so again, where is the push for higher rates?

The Fed has said that they will keep rates where they are until unemployment falls to nominal levels. This would be in the 6 - 7% range. You could make the argument that this target could be decades away. It certainly isn't going to be in the next 12 months, look at the March report, or better yet read the past 6 months of ISM's. Rates are not volatile, so again, why the rush.

Plus, what will happen to home prices if rates do go up? The answer is that they will go down. The market is supported by cheap Wall Street money right now, not organic growth. What will happen when the 50 to 60% of the current buyers go away when cash sales are taken out of the equation? What will happen to the affordability of homes when rates go up and you get a smaller house for the same monthly payment?

Perhaps I've been listening to Dave Ramsey too much, but money is far better being used to pay down debt after the emergency fund is fully stoked than trying to lock in a rate that might not change for years. But that's just me, and my crystal ball is no better than anybody else's, but until I see any chance of the Fed changing its policies, interest rates are not gonna change.

Just my 4 cents (adjusted for inflation :) )

JTS
 

BigRedRage

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rates went up while I was house shopping and have held strong at the 4%. I dont see them jumping up fast but you never know. Either way 4% is a great rate to lock in permanently as long as it doesnt mean you have no emergency funds
 

BillsCarnage

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As long as you can lock in under 4% you should be fine. I'd hang on as is until you start seeing sustained movement upwards. Once it hits 3.75% then start preparing to lock in.

As others have said, that is probably a couple of years away. In the mean time save what ever extra you can to make a secondary reserve.

The housing market is close to normalized, but the investors are already starting another bubble w/ rentals.
 
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justAndy

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thanks for the posts.
I realize that with my relatively small total debt load i can grind it down keeping things the way they are
 
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