What Are Home Equity Lines of Credit With Flex Lock?
Flex lock lines of credit on a home allow the homeowner to lock in the rate on all or even just a portion of the home equity, which offers great flexibility in times of fluctuating loan rates. Understand how flex lock works with information from a financial manager and currency trader in this free video on finance.
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Hi I'm Roger Groh. We're here today to talk about flex lock lines of credit on your home. Now traditionally, if you needed to borrow money for large purchases, many consumers in the United States have accessed the value in their homes. Which banks, until recently, have been very willing to loan against. Those are called home equity lines of credit. Traditionally, the rate of interest that you pay on debt that you borrow floats. So, let's say today you borrow at five percent. If rates moved up to eight percent in a year, you're going to pay eight then. And they're going to go up and down depending upon what happens to interest rates. Well, that makes it very difficult for planning purposes, and in fact, many make payment of that loan back difficult if rates went up substantially. So, one of the ways to get around that, is to lock in the rate that you pay on all or a portion of the home equity line of credit that you have. And that's what flex lock is. You can lock in twenty-five percent of the loan, you can lock in fifty percent, you can lock in seventy-five. You can lock in all of it. It's up to you. So that you can identify ahead of time, what the rate of interest is on the loan that you're going to have. Now, if you think that interest rates are going to go up substantially, well obviously you want to lock it in. If you think rates are going to go down, like it seem as though they will be doing here in the United States, well then you've got to say, well, why do it? Well, it doesn't cost you anything to lock it in. And it doesn't cost you anything to refinance it. So there's not a whole lot of downside into locking it in just in case we're wrong, and rates go up. Because you don't want to get caught like that. So I would say, lock in all or a portion of it, you can refinance it everyday if you want at a lower in order to reduce what you have to pay. And that's a little bit about flex lock lines of credit. I'm Roger Groh.