Quote:
Originally Posted by loob job
Also, i'm not 100% on this, so correct me if i'm wrong, but i don't think mortgage rates are tied to prime. So if prime goes up to 5.25 mortgage rates could stay the same or go down thus negating the interest savings by paying the mortgage with the line of credit.
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Fixed rate mortgages are not tied to Prime. Those rates are tied to Bond Yields.
However Variable rate mortgages are tied directly to Prime. For example if you had a mortgage that was at Prime -.60 (Prime is currently 4.75%) then right now the rate would be 4.15%. However if Prime drops .25% then your new rate is going to be 3.90%, conversely if Prime goes up .25% then your new rate is going to be 4.40%
Some people don't mind the fluctuation on variable rates. Other people would prefer to be locked into a rate for 3 or 5 years so they know exactly what they are going to be paying every month for the next few years.
But as for paying your mortgage with the line of credit you do have to make sure it makes sense especially if Prime does increase.