What Is a Fixed-Rate HELOC?

What Is a Fixed-Rate HELOC?

A fixed-rate home equity line of credit (HELOC) combines the features of a traditional HELOC and home equity loan in one product. It's a revolving line of credit that uses your home as collateral, but unlike most HELOCs, which have an annual percentage rate (APR) that fluctuates based on the market, a fixed-rate HELOC allows you to lock in the interest rate on some or all of your available credit.

You may be able to access up to 85% of your home's equity with a HELOC. You can use the funds for just about anything, and because your home acts as collateral for the loan, interest rates on HELOCs tend to be lower than rates on unsecured loans and lines of credit.

Learn more: Home Equity Loan vs. HELOC vs. Reverse Mortgage: What's the Difference?

How Does a Fixed-Rate HELOC Work?

Like a traditional HELOC, a fixed-rate HELOC consists of two phases: the draw period and the repayment period.

During the draw period, which usually lasts 10 years, you can borrow against the line repeatedly (up to the limit). Depending on the lender, you may make interest-only or principal and interest payments on fixed-rate balances.

When the draw period ends, the repayment period begins, and you can no longer borrow against the credit line. During this time, you must make principal and interest payments until your balance is paid in full. Repayment periods vary but typically last 20 years.

With a fixed-rate HELOC, you can convert part or all of your credit line to a fixed interest rate, and some lenders may also allow you to lock and unlock balances during the draw period to take advantage of declining rates. Because the interest rate fluctuates until you lock in the rate at the time you draw money from the line, you could have multiple balances with different interest rates.

You're only responsible for paying interest on the amount you borrow, not your approved credit limit. For example, if you're approved for a $100,000 line of credit to complete a home renovation project but only use $50,000, you only pay interest on $50,000.

Learn more: What You Need to Know About HELOCs in 2025

Pros and Cons of a Fixed-Rate HELOC

Weighing the advantages and disadvantages of your loan options can help you make an informed decision. Here are some pros and cons to consider with a fixed-rate HELOC.

Fixed-Rate vs. Variable-Rate HELOC

Should You Get a Fixed-Rate HELOC?

A fixed-rate HELOC may be a good option for homeowners who want the flexibility of a revolving credit line combined with the security and stability of predictable monthly payments.

Taking advantage of a lender's fixed-rate option can help you save on interest charges when rates are increasing. Because fixed-rate HELOCs may have minimum withdrawal amounts, plan carefully to avoid borrowing more than you need.

If you're comfortable with the uncertainty of varying monthly payment amounts and have the wiggle room in your budget to withstand a higher-than-expected payment, a variable rate may be a better choice, especially when rates are decreasing.

Additionally, because variable-rate HELOCs often have lower initial rates than fixed-rate HELOCs, converting to a fixed rate may not save you as much as you think, depending on current rates and the amount you plan to borrow. It's worth doing the math to compare your costs with a fixed- versus variable-rate HELOC.

Because market rates can be difficult to predict, it's important to weigh the pros and cons of all options carefully before making your decision.

How to Get a Fixed-Rate HELOC

Applying for a HELOC can generally be completed in a few steps.

• Determine how much you can borrow. Lenders may allow homeowners to borrow up to 85% of the equity they've accumulated in their homes.
• Create a budget. When you borrow against your home, you risk losing it. Develop a realistic budget that doesn't stretch your finances too thin and leaves you a financial cushion.
• Complete an application. Each lender has its own application, but you generally need to provide basic demographic, employment and income information. Lenders also require paystubs, W-2s, bank statements and other documents to assess your ability to repay the loan. They will check one or more of your credit reports to help determine creditworthiness.

• Compare loan terms and costs. Shopping around and comparing offers from multiple lenders can help you find the loan option that best meets your needs.
• Get an appraisal. Lenders usually order an appraisal to determine how much you can borrow based on your home's value.
• Gather your closing costs. You probably won't pay as much as you did on your original mortgage, but HELOCs generally come with closing costs you'll need to cover to finalize your loan. Your lender can give you an estimate of how much you'll need to pay.

• Close on the loan. If the lender approves your application, you'll typically close on your line of credit within 45 days.

Alternatives to a Fixed-Rate HELOC

A fixed-rate HELOC isn't the only option available that allows you to tap into the equity in your home. Here are some alternatives to consider.

• Variable-rate HELOC: A variable-rate HELOC, the most common type of HELOC, offers the flexibility of a fixed-rate HELOC without a set interest rate and predictable monthly payments. Rates fluctuate based on market conditions and may increase or decrease anytime. A variable-rate HELOC may work to your advantage if rates drop after you open the line, but if rates rise while the line is open, so will your monthly payments.
• Home equity loan: A home equity loan is an installment loan that allows you to borrow a lump sum you must repay in equal installments throughout the loan term. It doesn't provide the flexibility of a HELOC, but it has a fixed interest rate that makes budgeting easy and may be a good option for a large one-time expense.
• Cash-out refinance: This type of loan replaces your original mortgage with a larger one. You use the new loan to pay off the original and keep the difference in cash to use how you want. However, a new loan means different terms and interest rates. That may be a good thing if you get a lower rate, but it could cost you if rates have increased since you got your current mortgage and could extend your repayment timeline.

Frequently Asked Questions

The Bottom Line

No matter what loan product you choose, your credit history will influence the approval process. Knowing your credit score and understanding other factors lenders consider when reviewing your application, such as your income and debt-to-income ratio, can help you predict how likely you are to qualify.

You can check your credit reports from the three consumer credit reporting agencies (Experian, TransUnion and Equifax) for free once a week at AnnualCreditReport.com and get your FICO^® Score^☉ for free from Experian at any time.