Hedging a mortgage with an ETF

C

chromosome

I am in the process of obtaining financing for a home purchase. The breakdown is as follows:

Cash down payment (no rate): $15,000
Cash down payment (floating 3% rate - follows PRIME, floats monthly): $47,500
Loan from bank (30-year fixed, 5%): $187,500

I am interested in setting up a hedging stragetgy to protect myself against the upward movement of PRIME. I am wondering if anyone has experience with this on a retail level.

The specific question is whether or not there is an ETF product that follows the PRIME rate I may short or if a futures account would be a better idea. Any thoughts are appreciated, thanks!
 
Quote from chromosome:

I am in the process of obtaining financing for a home purchase. The breakdown is as follows:

Cash down payment (no rate): $15,000
Cash down payment (floating 3% rate - follows PRIME, floats monthly): $47,500
Loan from bank (30-year fixed, 5%): $187,500

I am interested in setting up a hedging stragetgy to protect myself against the upward movement of PRIME. I am wondering if anyone has experience with this on a retail level.

The specific question is whether or not there is an ETF product that follows the PRIME rate I may short or if a futures account would be a better idea. Any thoughts are appreciated, thanks!
More...

http://lmgtfy.com/?q=Prime+Rate+ETF

Do what you wish with an ETF like PPR that "does" what you want it to do, but imo, you need to use derivatives to get the results you're after. Best wishes.:)
 
Quote from chromosome:
----financing for a home purchase.
----setting up a hedging stragetgy to protect myself against the upward movement of PRIME.
----an ETF product
----futures account would be a better idea?
----thoughts....
More...
1) An ETF may not "track" as well as you hope for. :(
2) Fed Funds futures should track the fed funds rate more precisely and ideally, the prime rate will be ~300 basis points over that. :cool:
3) EuroDollar futures may be better if you end up getting a LIBOR-indexed mortgage. :)
 
Quote from nazzdack:

1) An ETF may not "track" as well as you hope for. :(
2) Fed Funds futures should track the fed funds rate more precisely and ideally, the prime rate will be ~300 basis points over that. :cool:
3) EuroDollar futures may be better if you end up getting a LIBOR-indexed mortgage. :)
More...

If he needs to <i>borrow most of his downpayment</i> why does anyone imagine he has assets sufficient to trade futures?
 
Quote from Rodney King:
----If he needs to....
----assets sufficient to trade futures?
More...
1) That's a valid point. :)
2) This site would have much less "traffic" if posters had to prove financial and psychological suitability to trade futures. :(
3) I didn't want to simply tell the guy to go to wilmott.com instead. :cool:
 
You must log in or register to reply here.
Back
Top