What is benefit of a variable home equity loan tied to the prime rate
vs. a fixed rate home equity loan at 7.2%?  With a commitment letter
at an initial variable rate at 6.85% with the Prime index at 7.5%,
does it make sense to commit to a 7.2% fixed rate if we believe that
interest rates are going to continue to go up? We would like summary
articles of these issues (not a specific recommendation) that explains
them in plain English so we can make an informed decision.

loanee-ga,

I've collected links to articles from what I consider to be some of
the more informative sites and sources on the web.  Many different
aspects of fixed vs variable loans are discussed, along with
considerations to take into account in making a decision between the
two.

In general, sites seem to lean against the variable-rate loans unless
you have a high tolerance for risk, and will probably hold the loan
for only a few years.  With a only a small differential between the
interest rates on the two (7.2% vs 6.85%), I would think the arguments
against a variable rate loan become even more convincing.

As you will see, there are many factors to consider.  I trust these
links will assist you in this, and will fully meet your needs.

However, if there's anything else I can do for you, just let me know
by posting a Request for Clarification.

Best of luck,


pafalafa-ga


===============


http://finance.yahoo.com/loan/mortgage/which_kind_of_loan/article/101462/The_2_Basic_Loan_Types:_Fixed_and_Adjustable
Mortgage Center
Your Choice of Mortgage: Basics and Variations
Pros and Cons


http://www.ces.ncsu.edu/depts/fcs/housing/pubs/fcs437.html
Choosing the Best Mortgage


http://www.explainingmortgages.com/mtgpro/tutorials2/tutorial_on_selecting_mortgage_features.htm
Tutorial on Selecting Mortgage Features


http://www.fdic.gov/consumers/consumer/news/cnsum05/summer_05_bw.pdf
A Shopper?s Guide to Bank Products and Services


http://homebuying.about.com/cs/mortgagearticles/a/mortgages_arm.htm
Facts About ARMs, Adjustable Rate Mortgages


How to Decide if an ARM Is Right for You
http://homebuying.about.com/library/weekly/aa072699b.htm


Adjustable Rate Mortgages (ARM)  
 Reducing Your Risks  


http://finance.yahoo.com/loan/mortgage/what_kind_of_loan/article/101325/Choosing_the_Right_Loan
Choosing the Right Loan



----------
Lots of information at the Mortgage Professor site:


http://www.mtgprofessor.com/adjustable_rate_mortgages.htm
Questions on Adjustable Rate Mortgages


especially:


http://www.mtgprofessor.com/A%20-%20ARMs/choosing_between_arm_and_frm.htm
What's the Best Way to Choose Between an ARM and an FRM?
----------


http://finance.yahoo.com/loan/mortgage/what_kind_of_loan/article/101407/When_Are_ARMs_a_Good_Buy
When Are ARMs a Good Buy?



Again, let me know if there's anything else you need at this point.


paf



search strategy -- Looked through bookmarked sites on mortgages for
information on fixed vs variable loans

Very helpful. I'm amazed at the results. Thank you!!1

do a google search for "history of prime rate" and look at the first
hit. You can see some obvious rate movement trends. I think you can
expect the prime rate to continue to rise, which mostly likely will
not mitigate the cost savings associated with the intial "teaser" rate
you would receive alternatively.