Question:

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

Answer:

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.

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Why: Refinance to a fixed rate loan while mortgage rates are still low.
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Common misspellings: mortage and morgage