How to Compare HELOC Rates in Banks
A home equity line of credit, also known as a HELOC, enables a homeowner to borrow up to a specific amount secured by the home. Unlike home equity loans that have a fixed interest rate, HELOCs have a variable annual percentage rate (APR) that can fluctuate over time. It’s important to compare rates before choosing a HELOC.
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Instructions
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Use online resources to compare HELOC rates from financial institutions across the country. Make a list of companies that offer the most competitive rates so you can investigate potential offers further.
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Determine if the published rate is an introductory offer. Ask the lender about such conditions before choosing a loan. Financial institutions make introductory offers to generate new business using terms that can last only a few months. After the offer expires, your line of credit is assessed a new rate that can make monthly payments higher.
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Inquire about lifetime caps. HELOC rates are not fixed interest rates; they fluctuate with the prime lending rate. Ask your lender about a cap on the line to protect you from paying an extremely high interest rate if the prime rate increases significantly.
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Determine if the lender offers periodic caps, or the maximum amount of percentage points your interest rate can rise in a specific time frame. Some lenders offer HELOC rates that, for example, might not increase more then one-half of a percentage point in six months.
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Tips & Warnings
As you pay down your HELOC, more credit becomes available to you. For example, if your balance is $10,000 and you pay back $8,000, you’ll have that $8,000 available again, assuming your limit is $10,000 or more.
If you plan on selling your home, outstanding HELOC debt must be repaid with the sale.
