When you are considering the terms of your home equity loan, it is crucial to look at the HELOC interest rate the lender is offering. It’s also important to know if the lender is offering a variable or fixed HELOC interest rate. Most HELOC loans are incepted with a variable interest rate. When it comes time for refinancing your HELOC interest terms, be certain to ask if a fixed rate is available.
What is HELOC interest only
During the draw period of the HELOC loan, the payments made to the lender are for the interest only. With a variable rate loan, this interest only payment amount is tied directly to the prime lending rate. If the prime rate stays low, the monthly payment stays low. If for some reason the prime rate raises then so do the monthly payments.
What is the HELOC interest during repayment
The HELOC interest during the repayment period (up to twenty years) is dependent on the terms of your HELOC at loan signing. Before your repayment period begins, it will be important to know if you have a single large payment due or if the interest rate over the repayment period is variable. If the HELOC interest rate is variable, you will want to consider refinancing options such as a changeover to a fixed interest rate.
Your lender will be able to explain to you the refinancing options that are available in terms of your HELOC interest rate. When you sit down with the lender make certain you have a list of all of your questions and concerns. Your lender will want to keep your business and will offer the best solutions for your particular financial situation. Ask all of the right questions, get all of the information that you can from your lender and take a day or two to make your decision. If you take your time and work hard to become an informed consumer your HELOC interest terms will end up being the very best for your situation.