How Often Do Interest Rates Change on a HELOC?

Find out what kind of leeway you have if you wish to make a change

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If you’re a homeowner looking to borrow money, chances are you’ve already begun your research on a home equity line of credit, also known as a HELOC. This type of home equity financing is a revolving line of credit that you can borrow from as needed. Each draw can be done by writing a check, having funds transferred to a bank account, or using a card associated with the line of credit.

Before deciding to borrow against the equity in your home, understand how interest rates work on these loans. There are different types of rates with HELOCs, and they change at various paces. Because they will tie into your repayment, you’ll want to know what to expect, if it’s possible to change from a variable to a fixed rate on the amount you borrow, and how often the interest rate on a HELOC could potentially change.

Key Takeaways

  • A HELOC is a revolving line of credit you can borrow from until you reach the credit limit.
  • HELOC interest rates can be either fixed or variable. If variable, your lender may give you the option to convert to a fixed-rate or fixed-term loan.
  • In most cases, your HELOC interest rate will never exceed 18%, but only credit unions have a mandate. Always read the terms of your credit line.

Variable vs. Fixed-Rate HELOCs

HELOC rates fall into two categories: variable and fixed. A HELOC with a variable rate will increase or decrease based on a particular index such as the U.S. Treasury rate or prime rate. The interest rate you pay will increase or decrease based on the fluctuation of the index rate, plus a margin predetermined by your lender.

Less often, your lender may offer a fixed-rate HELOC. This is where you pay a set interest rate that won’t change for either a specific time period or for the life of your loan.

How Often Variable HELOC Rates Change

While variable interest rates are tied to an index, the frequency will be more predictable for borrowers. Generally, the rate on your HELOC can change as often as every month. However, your lender will disclose upfront when rates may change, and you will be able to see the changes on your statement before your payment due date.

You can look up your terms by reviewing your signing documents from when you applied for your HELOC. You should also check details on whether your lender has set a certain minimum or maximum on the variable rate you may pay, as there may be limitations in place.

Converting a Variable HELOC to Fixed Rate

If you’re interested in converting a variable HELOC to a fixed interest rate, it’s best to know if this is an option beforehand. Not all lenders allow this, but if they do, the process is fairly straightforward. During the draw period, you will have the choice of converting all or a portion of your balance to a fixed interest rate.

If you choose to only convert an amount lower than your balance, you may be able to do multiple fixed-rate draws. There may be provisions on the amount and length of term for the fixed-rate loans.

As with a variable rate HELOC, the rate itself is determined by a specific index. However, the interest rate will be locked in based on the time you make the request.

Frequently Asked Questions (FAQs)

What is a good HELOC interest rate?

Since the indexes for HELOC interest rates change frequently, the best way to get a good rate is to choose a lender with a low starting APR.

How high can a HELOC rate go?

Only federal credit unions have a loan interest-rate ceiling, which is capped at 18%. While many lenders cap HELOC rates at this percentage as well, each state can set its own limits. You can research the specific state a lender is located in ahead of time; this information will also be disclosed to you during the HELOC application process.

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Article Sources

  1. Concordia University Irvine. “Fixed vs. Variable Interest Rates,” Page 2.

  2. The Federal Reserve Board. "What You Should Know About Home Equity Lines of Credit," Page 10.

  3. Bank of the West. “Consider a Home Equity Line of Credit.”

  4. Bank of the West. "Important Terms of the Bank of the West Platinum Equity Choice Line of Credit," Page 6.

  5. National Credit Union Administration. “Permissible Loan Interest Rate Ceiling Extended.”