Is it better to get a fixed rate home equity line of credit (heloc)?


Pros and cons of getting a fixed-rate home equity line, commonly caled HEL, compared to a floating rate HELOC largely resemble pros and cons of FRMs vs. ARMs.

A fixed low rate HELOC during a period when interest rates are climbing will make a very good predictable choice for a borrower. However, if rates are going down and stay down for some time, borrowers would not be able to benefit from decreasing market rates.

And vice versa - many people are interested in getting a HELOC with low adjustable rate. However, often a home equity line of credit will adjust rates quarterly and even monthly, and if prime rates are climbing up, you'll be seeing a significant increase in the monthly payment.

Often, there are options to convert a fixed-rate HELOC into an adjustable one and vice versa, but you will be charged a penalty fee for doing so.

However, if rates are currently low, you should get a fixed rate home equity line of credit. Since HELOCs are often extended over 5 to 20 and more years, sooner or later you'll benefit from the fixed HELOC protecting you from climbing rates.

Mortgage rates hit their lowest since 1955. Ask the home loan experts we recommend Quicken Loans how to take advantage of them.
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