Many homeowners tap their Home Equity when they need cash for things like
debt consolidation, home remodeling or other expenses. A Home Equity Loan
and a Home Equity Line of Credit are the most common ways homeowners access
this money. Home Equity Loans are typically fixed rate. Home Equity Lines
of Credit (HELOC), however, are usually variable rate. However, it is
possible to get a fixed rate HELOC, or to transfer your variable rate HELOC
into a fixed rate Home Equity Loan. And a fixed rate has both pros and
cons, like:
(PRO) Your payment always stays the same. If you choose a fixed rate
HELOC, you always know what your monthly payment will be because the rate
never changes. For folks who like to follow a strict budget--or simply
prefer the security of knowing the amount of their monthly payment--this
kind of stability can be appealing.
(PRO) You may end up with a super cheap loan. If you borrow the HELOC
during a time when rates are low, you may end up with a very low-cost loan
as rates rise. By locking in that low rate during the right time, you'll
pay less over the years than if your costs had risen with increasing
interest rates.
(CON) You may end up paying too much. If you lock-in your fixed rate
during a time when interest rates are high--and they subsequently drop--you
may end up with a higher rate than the current average. However, should
this happen, you may still be able to refinance your HELOC or Home Equity
Loan to get the lower rate.
(CON) You can't tap into it again. If you transfer your variable rate
HELOC to a fixed rate Home Equity Loan, you won't be able to access cash
from that account again. Instead, it will be similar to a regular mortgage,
which means the extra cash won't be available unless you take out another
loan.
RSS
Many homeowners tap their Home Equity when they need cash for things like debt consolidation, home remodeling or other expenses. A Home Equity Loan and a Home Equity Line of Credit are the most common ways homeowners access this money. Home Equity Loans are typically fixed rate. Home Equity Lines of Credit (HELOC), however, are usually variable rate. However, it is possible to get a fixed rate HELOC, or to transfer your variable rate HELOC into a fixed rate Home Equity Loan. And a fixed rate has both pros and cons, like:
(PRO) Your payment always stays the same. If you choose a fixed rate HELOC, you always know what your monthly payment will be because the rate never changes. For folks who like to follow a strict budget--or simply prefer the security of knowing the amount of their monthly payment--this kind of stability can be appealing.
(PRO) You may end up with a super cheap loan. If you borrow the HELOC during a time when rates are low, you may end up with a very low-cost loan as rates rise. By locking in that low rate during the right time, you'll pay less over the years than if your costs had risen with increasing interest rates.
(CON) You may end up paying too much. If you lock-in your fixed rate during a time when interest rates are high--and they subsequently drop--you may end up with a higher rate than the current average. However, should this happen, you may still be able to refinance your HELOC or Home Equity Loan to get the lower rate.
(CON) You can't tap into it again. If you transfer your variable rate HELOC to a fixed rate Home Equity Loan, you won't be able to access cash from that account again. Instead, it will be similar to a regular mortgage, which means the extra cash won't be available unless you take out another loan.