When I decided it was time to look for ways of paying for my first born’s college tuition, one of the first considerations for me was a low rate HELOC (home equity line of credit). I didn’t want to do a mortgage refinance on my first mortgage and a HELOC seemed to be my best option since I could take money out of the fund as I needed it in order to pay the tuition. I could do this over a long draw period of ten years. I was able to work with my bank to make certain my low rate HELOC had the best terms available.
More low rate HELOC advantages
The other advantages of a HELOC instead of a home mortgage finance include only having to pay the interest payments during the initial draw period of the loan. With most mortgage refinance options, you receive your money in one lump sum and must start the repayment process immediately. I was able to negotiate with my lender and even though most HELOCs have a variable rate payment system, my lender agreed to a reasonable fixed rate for the repayment period, allowing me to lock in my low rate HELOC.
Variable or low rate HELOCs
Now, not all lenders are going to do this, and I’ve got very good credit, which didn’t hurt. If you end up having to accept a variable rate term, just understand that the repayments are closely tied to the prime rate and may vary each month. This variable rate repayment structure is the norm for HELOC loans so it is what should be expected when you apply – don’t be surprised to see it. With that said, it can’t hurt to ask your lender if they would consider a low rate HELOC for you, based on your sound credit history.