Equity loans, a review of the topic
Banks assume that at least once, the prime interest rate will spike above the interest rate of your fixed rate mortgage and the bank will have to pay the difference itself. To cover for this eventuality, banks set the interest for fixed rate mortgage loans higher than that for adjustable rate mortgages. A convertible home mortgage loan is initially an adjustable rate loan, but you may convert to a fixed rate at any time during a set period in the duration of the loan. This is a good type of loan to choose if interest rates are high but are expected to drop. You can take advantage of the lower interest rate of an adjustable rate home mortgage when interest rates are high, then lock in a better interest rate for the life of the loan as soon as rates drop.