If you are refinancing or considering a home equity line of credit (HELOC), it’s wise to look at the possibility of a fixed rate HELOC. Most HELOC products are enabled with a variable interest rate during the repayment period. Depending on the lender it may be possible for you to obtain a fixed rate HELOC either at the initial closing or when it comes time to go into the repayment phase of the loan.
Fixed rate HELOC advantages
One of the advantages of a fixed rate HELOC is that there are few surprises. When you sign the loan, you will know exactly what the HELOC rates are. If market conditions are optimal, you may be able to lock in the rate, whether you are refinancing or starting a new HELOC.
The primary disadvantage to a fixed rate HELOC
The advantages far outweigh any disadvantages to a fixed rate HELOC. The only true concern is that if you lock in your rate and then in the future HELOC rates decrease, you’ve missed out. For those that take a conservative approach to their finances, this should not be too much of a concern
It’s most important to do your homework before applying for a HELOC. Take the time to research HELOC rates and do a little shopping around to see which lenders offer a fixed rate HELOC and if so, what kind of rate would they be willing to offer. If you are about to go into repayment with your current HELOC that has a variable rate, be certain to check with your lender to evaluate what options if any may be available for your specific situation. It is entirely possible that they have a program for a fixed rate HELOC, which means you are well on your way to the peace of mind that a fixed rate HELOC offers.