Fixed Rate HELOC – What are the Pros and Cons?
Home equity lines of credits or HELOC, are revolving credit accounts
that are protected by a home's equity. Homeowners have many options for
accessing their home's equity. Home equity loans are ideal for obtaining
a one-time lump sum of cash. On the other hand, if homeowners prefer an
open line of credit, which enables them to borrow as needed, a HELOC is
a better option.
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What is a HELOC?
When homeowners apply for a home equity line of credit, they obtain a
credit line which uses their home as collateral. There are different
types of home equity lines of credits. Some homeowners may obtain limits
up to 75% of their home's appraisal value, whereas others obtain limits
that match the amount of equity.
The majority of home equity loans have a fixed term of 10 years. During
this time, homeowners are able to withdraw funds as needed. Unlike home
equity loans, monthly payments are not fixed. Payments are based on the
dollar amount borrowed from the home equity line of credit, thus
minimum monthly payments will fluctuate.
Benefits of a Fixed Rate HELOC
If choosing a home equity line of credit, homeowners may opt for a
fixed rate. There are several benefits to choosing a fixed rate line of
credit. The obvious reason is predictability.
Although monthly payment will fluctuate depending on the amount borrowed, homeowners will never have to worry about an interest rate hike
during the 10 year period. Furthermore, a fixed rate line of credit will
offer significant long-term savings – especially if rates continue to
rise.
Many are attracted to adjustable rate lines of credits because of low
initial rates. However, the rates on an adjustable line of credit can
change daily. Thus, if homeowners borrow a large amount, they may be hit
with noticeably higher payments.
Disadvantages of a Fixed Rate HELOC
Although fixed rate home equity lines of credit offer stability and
predictability, there are potential drawbacks of this option. For example,
if interest rates decrease and remain low, those who choose a fixed
rate option will not benefit because their rate is locked for a fixed
term. Borrowers can switch from a fixed to an adjustable rate. However,
there are penalties for doing so.
Our Recommended Home Equity Line of Credit Lenders:
Top Recommended Companies To Refinance With:
(updated ):
Act Now! Lower your monthly mortgage payment!
- Competitive rates and no hidden fees
- Bad Credit OK
- New Purchases, Home Equity & Refinance
- One dedicated mortgage banker from first call to closing
- Quick Application with worthwhile results
If you are looking for a mortgage loan but have "less than perfect credit" this company has options for people with credit problems. Complete a short form and get one dedicated mortgage banker from first call to closing with a simple, straightforward process.
Mortgage rates are still low. Refinance & Lower Your Payment!
- Get Started on a Lower Payment Now!
- America's #1 Online Lender
- Save More and Spend Less!
- No Obligation and Free Expert Advice Another Great "bad-credit" Mortgage Company! QuickenLoans is also a competitive mortgage company for people with all types of credit including poor credit. Refinance or get new mortgage offers from this reputable Web based mortgage lender.
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