Traditionally, HELOCs come with variable interest rates, which can fluctuate over time, leading to unpredictable monthly payments. However, many mortgage lenders now offer fixed-rate HELOC loan options within their terms, providing borrowers with the stability of consistent payments. This post considers the availability today of fixed-rate HELOCs, their benefits and drawbacks, and considerations for homeowners contemplating this financial product.
Understanding Fixed-Rate HELOCs
A fixed-rate HELOC allows borrowers to convert a portion or all of their variable-rate balance into a fixed interest rate. This conversion can typically be done during the draw period—the time frame in which you can borrow funds. By locking in a fixed rate, homeowners can secure predictable monthly payments, shielding themselves from potential interest rate increases in the future.
For instance, U.S. Bank offers a fixed-rate option on their HELOCs, enabling customers to lock in a fixed interest rate for up to 20 years on some or all of the borrowed funds. Borrowers can have up to three active fixed-rate locks at one time, each requiring a minimum of $2,000. As the principal is repaid, the available credit replenishes, allowing for continued borrowing during the draw period.
Benefits of Fixed-Rate HELOCs
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Predictable Payments: By converting to a fixed rate, borrowers can enjoy consistent monthly payments, making budgeting more manageable.
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Protection from Rising Interest Rates: Fixed rates safeguard against potential increases in interest rates, providing financial stability.
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Flexible Borrowing: Many lenders allow multiple fixed-rate locks within a single HELOC, offering flexibility to manage different expenses or projects.
Potential Drawbacks
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Higher Initial Rates: Fixed interest rates on HELOCs may be higher than the initial variable rates, potentially leading to higher immediate payments.
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Conversion Fees: Some lenders may charge fees to convert a variable-rate balance to a fixed rate, adding to the overall cost.
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Limited Flexibility: Once a balance is locked into a fixed rate, it may not benefit from future decreases in interest rates without unlocking and re-locking, which could involve additional fees.
Who Offers Fixed Rate HELOC Loans?
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Bank of America
Bank of America allows customers to convert some or all of their variable-rate HELOC balances to a fixed rate with no fees for the conversion. Up to three Fixed-Rate Loan Options can be open simultaneously. Specific interest rates are not publicly disclosed and may vary based on factors such as creditworthiness and loan-to-value ratio.
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U.S. Bank
U.S. Bank offers a fixed-rate option on their HELOCs, enabling customers to lock in a fixed interest rate for up to 20 years on some or all of the borrowed funds. As of December 19, 2024, the variable rate for HELOCs ranged from 7.95% APR to 11.60% APR. Fixed rates may differ and are determined at the time of rate lock.
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PNC Bank
PNC Bank provides a Choice HELOC with a Fixed Rate Lock feature, allowing borrowers to lock in a fixed rate on all or part of their variable-rate balance during the draw period. Rates are based on the index value for fixed-rate options in effect at the time a Fixed Rate Part is established, plus a margin determined by credit qualifications and other factors.
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Navy Federal Credit Union
Navy Federal Credit Union offers Fixed-Rate Home Equity Loans with rates as low as 7.340% APR. These loans allow borrowers to pay no closing costs and borrow up to 100% of their home’s equity. The fixed rate ensures consistent monthly payments over the life of the loan.
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Fifth Third Bank
Fifth Third Bank provides a HELOC with a unique rate-lock feature that allows borrowers to lock in a fixed rate on any amount for a $95 fee. The bank allows up to three rate locks on three separate balances at a time, and borrowers can unlock the rates at any time free of charge. APRs start at 8.50%.
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Connexus Credit Union
Connexus Credit Union offers HELOCs with the option to convert to a fixed rate. APRs start at 8.74%, and loan amounts range from $5,000 to $200,000. Specific terms and conditions apply based on creditworthiness and other factors.
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Alliant Credit Union
Alliant Credit Union provides HELOCs with fixed-rate options, offering APRs starting at 8.75%. Loan amounts start at $10,000, and a minimum credit score of 620 is required. Borrowers can benefit from predictable monthly payments by opting for the fixed-rate feature.
Considerations When Choosing a Fixed-Rate HELOC
When evaluating fixed-rate HELOC options, consider the following factors:
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Interest Rates: Compare the fixed interest rates offered by different lenders, keeping in mind that rates can vary based on credit score, loan-to-value ratio, and other financial factors.
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Fees: Be aware of any fees associated with rate locks, conversions from variable to fixed rates, annual fees, and closing costs.
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Loan Terms: Understand the draw and repayment periods, as well as any options to re-borrow funds during the draw period.
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Credit Requirements: Ensure you meet the lender’s credit score and financial health criteria to qualify for the best rates.
It’s advisable to contact lenders directly or visit their official websites for the most current rates and terms, as these can change based on market conditions and individual qualifications.
Fixed Rate HELOC vs Home Equity Loan
Important with Fixed Rate HELOC Loans
In the ever-changing landscape of interest rates, a fixed-rate HELOC loan can be a beacon of stability for homeowners seeking predictable payments and protection from rate fluctuations. By carefully evaluating the benefits, potential drawbacks, and offerings from various lenders, you can determine if a fixed-rate HELOC aligns with your financial needs and goals.
References
Bank of America. (n.d.). Home Equity Line of Credit (HELOC) from Bank of America. Retrieved March 24, 2025, from https://www.bankofamerica.com/home-equity/
Navy Federal Credit Union. (n.d.). Fixed-Rate Home Equity Loans. Retrieved March 24, 2025, from https://www.navyfederal.org/loans-cards/equity/fixed-rate.html
PNC Bank. (n.d.). Choice Home Equity Line of Credit Fixed Rate Lock. Retrieved March 24, 2025, from https://www.pnc.com/en/personal-banking/borrowing/home-equity-loans/enhanced-choice-home-equity-line-of-credit/fixed-rate-lock.html
U.S. Bank. (n.d.). HELOC Fixed-Rate Option. Retrieved March 24, 2025, from https://www.usbank.com/home-loans/home-equity/home-equity-line-of-credit/fixed-rate-heloc.html