Fixed-Rate HELOC: How It Works and Pros and Cons

A home equity line of credit, or HELOC, usually has a variable interest rate that will move up or down based on the market. However, some lenders allow you to “lock” the rate when you make a withdrawal, so that your payments are fixed.

Fixed-rate and variable-rate HELOCs each have their own advantages, so compare lender options before deciding.

Fixed rates vs. variable rates

A HELOC can last for decades, with many borrowers choosing a 20-year repayment term. With a variable rate, it’s difficult to predict how your HELOC interest rate will change over such a long period. Lenders have ceilings for annual percentage yield, or APR (usually around 18%), but it’s unlikely you’ll ever pay the maximum.

Some people are uncomfortable with this level of uncertainty. Fixed-rate HELOCs allow you to lock in some or all of your loan at a specific APR, giving you predictable payments. If you choose to freeze the APR for part of the loan only, the rate will be variable again when you make further draws.

Not all lenders offer a fixed-rate option. Those that do each have their own guidelines, so it’s important to read the fine print. Bank of America, for instance, requires a minimum outstanding balance of $5,000 to convert from a variable rate to a fixed one.

Some lenders also limit the number of times you can choose a fixed-rate option. For example, Truist borrowers can have a maximum of five open fixed-rate withdrawals at a time.

Pros of getting a fixed-rate HELOC

For borrowers who don’t want the risk of rising interest rates, there are benefits to selecting a fixed-rate HELOC.

• Fixed-rate HELOCs can save you money in the long run if interest rates go up.

• You know exactly what you’ll be paying, making it easier to plan for your financial future.

• Some lenders allow you to revert to a variable rate if rates go down, so you wouldn’t miss out on lower costs. 

Cons of getting a fixed-rate HELOC

For borrowers who are okay with taking on a little risk, choosing a variable rate will give you the most lender options and could save you money upfront.

• Fixed-rate options often have a higher initial APR than variable-rate HELOCs. If you think that you’ll be paying off your HELOC quickly, the variable interest rate presents less risk, so the higher costs might not be worth it. 

• You’re limited in your lender choices, since not all HELOC lenders offer a fixed-rate option.

• You may be limited in the number of times that you can lock a rate.

» MORE: Is a HELOC a good idea?

How to get a fixed-rate HELOC

Not every HELOC lender will offer a fixed-rate option. Out of 30 lenders surveyed by NerdWallet, 21 confirmed that consumers could lock in their loan at a fixed rate. If a fixed-rate HELOC is something that you want (or may want), you should ask about it when getting quotes from potential lenders. NerdWallet’s list of the best HELOC lenders is a good place to start your search. It notes which lenders offer a fixed-rate option.

Once you get a HELOC, the amount of time you have to withdraw funds (known as the draw period) is usually 10 years. The repayment period varies depending on the lender and the terms of your loan, but it can be as long as 20 or even 30 years.

» MORE: How much can you borrow on a HELOC?

Consider a home equity loan

When comparing lenders that offer fixed-rate HELOCs, you might also want to consider a home equity loan. Home equity loans are always offered at a fixed rate.

However, unlike a HELOC that allows you to draw as much as you need over time, you receive the funds as one lump sum. So if you choose to explore home equity loans, you’ll need to know exactly how much you need to borrow upfront.