What the Experts Now Advise on Real Estate and Borrowing

Here’s what most experts are telling consumers now when it comes to real estate and borrowing:

First-time buyers: Proceed with your plans because further increases in the cost of homes should wipe out any savings that a further drop in rates might provide. Consider taking out an adjustable-rate mortgage or convertible mortgage instead of a fixed-rate loan: You’ll get a below-market introductory rate and could save even more if rates continue to decline.

“Move-up” buyers: Look before you leap, for prices in the high-end market may be poised for a slowdown. If you have plenty of equity in your current home, need the extra space, won’t have to give up a current mortgage with an unusually attractive rate and can find a house with good appreciation prospects, it’s probably safe to move. Otherwise, stay put and be happy with the home you already have. If space is a problem, consider remodeling.

Home-equity borrowers: You’ll have to decide whether you want the safety of a conventional, fixed-rate second mortgage--in which case you’ll get a lump sum and pay about 12% or 13%--or are willing to take a chance with a variable-rate home-equity line of credit, which means you could wind up paying 17% or more when the loan is first adjusted. Much depends on how you’ll use the proceeds of the loan: It’s probably best to take out a conventional second if you’ll use all the money right away, such as to add a room to your house. But choose a credit line if you’ll need to draw down cash over an extended period; that way, you won’t wind up paying interest on money that you aren’t using.