About Home Equity Line of Credit Rates

Home equity lines of credit rates are variable.

A home equity line of credit, or HELOC, is a secured revolving line of credit in which the lender uses your home as collateral. Lenders charge different interest rates depending on the type of HELOC.

Interest Basis

Lenders calculate interest rates by taking the U.S. prime rate or Treasury bill rate and adding a percentage to that, called a margin. The amount of the margin varies, often depending on your credit history. All home equity line of credit rates are variable with some having the option of converting into a fixed rate loan.

Variable Rates

When a lender writes a HELOC, it pegs the variable interest rate against either the U.S. prime rate or the Treasury bill rate. The interest rate changes depending on the movement of the rate the lender pegs the HELOC against. When these rates increase or decrease, the interest rate on your HELOC moves accordingly.

Convertible Rates

Convertible HELOCs charge variable interest for a stated period of time. After that stated period passes, you can convert the variable rate HELOC into a fixed rate loan.

References

• Financial Web: Some HELOC Fast Facts