Banks That Offer Fixed Rate HELOCs
Home equity lines of credit, or HELOCs, typically carry variable interest rates, which can make it difficult to gauge the total costs associated with this form of financing. However, these lenders often offer borrowers the option to enter into a fixed-rate HELOC, which may be preferable for borrowers who want flexible financing with predictable repayment.
One of the benefits of owning a home is the ability to build and leverage equity. Most homeowners have a lot of money invested in their house, and they can access it to finance home improvements, consolidate debt, or just about anything else.
To tap into this equity, you must first apply for a home equity loan or home equity line of credit (HELOC), both of which carry their own set of pros and cons, specifically as it relates to how money is distributed and the interest rate you pay.
Traditionally, home equity loans come with fixed rates applied to one lump-sum payment. HELOCs are a flexible credit line you can borrow from as you need, and they usually come with variable rates. Some homeowners may shy away from this option for fear of rising interest rates. But fortunately, if you’re considering a HELOC, then you may be able to take advantage of the best of both worlds.
In this review:
- 5 of the Best Banks for Fixed-Rate HELOCs
- What Are the Benefits of a Fixed-Rate HELOC?
- Are There Downsides to a Fixed-Rate HELOC?
5 of the Best Banks for Fixed-Rate HELOCs
Though not all banks offer fixed-rate HELOC options, there are a few that do, including the following lenders.
Note that most lenders base eligibility for fixed rates on a variety of factors, including your credit score and your loan-to-value (LTV) ratio.
With a Chase HELOC, homeowners can borrow between $25,000 and $500,000 to make home improvements, consolidate debts, or finance a variety of other expected and unexpected expenses. Though the HELOC starts with a variable interest rate, borrowers who meet minimum requirements can lock in a fixed rate during the draw period by using the Chase Fixed Rate Lock Option.
- Loan-to-Value Ratio: Homeowners with an LTV of less than 80% may be eligible for a HELOC with Chase.
- Interest Rates: Current variable rates range from 5.75% to 7.64%, based on your creditworthiness. Chase customers may be eligible for a discount of up to 0.62%. Reminder: Rates start as variable, but you can lock in a fixed rate if you meet the minimum requirements.
- Fees, Terms, & Everything Else: Approved borrowers will have access to a flexible line of credit for 10 years, at the end of which they will have a repayment period of up to 20 years. All HELOCs include a $50 origination fee and a $50 annual fee; however, there is no fee associated with the Lock Feature.
A Wells Fargo HELOC offers homeowners flexible financing with credit amounts ranging from $25,000 to $500,000. Although the line is issued as a variable-rate HELOC, borrowers can choose the Fixed-Rate Advance Option to convert all or part of their loan to the current fixed HELOC rate.
- Loan-to-Value Ratio: Typically, borrowers must have an LTV of 85% or less.
- Interest Rates: HELOC variable rates range from 5.125% to 10.125%, based on creditworthiness. HELOC rates will never exceed 18.00%. Reminder: Rates start as variable, but you can lock in a fixed rate if you meet the minimum requirements.
- Fees, Terms, and Everything Else: Wells Fargo offers approved borrowers a draw period of 10 years plus 1 month, at the end of which they will enter a repayment period of up to 20 years. There are no origination fees, annual fees, draw fees, prepayment penalties, or closing costs.
SunTrust offers HELOCs with highly competitive promotional rates that often dip below the national prime rate for a specified period of time. With a SunTrust HELOC, borrowers can access between $10,000 and $500,000 to do everything from making home improvements to covering medical and educational expenses.
- Loan-to-Value Ratio: Typically, borrowers must have a combined LTV of 70% or less; this means that the LTV calculation also accounts for the requested HELOC amount.
- Interest Rates: On average, borrowers can expect fixed rates starting between 5.25% and 6.72%; however, some borrowers may be eligible for a special rate discount for the first twelve months. The maximum rate is 18% APR.
- Fees, Terms, and Everything Else: Like other lenders, SunTrust offers borrowers a HELOC with a draw period of a 10-year and up to 20-year for repayment. There are no closing costs.
BB&T primarily offers home equity loans to residents in the Southeast, though residents as far up as PA and NJ may be eligible. With a HELOC from BB&T, borrowers can take a line of credit between $15,000 and $1 million (varies by state) with fixed monthly payments
- Loan-to-Value Ratio: Typically, BB&T will work with borrowers who have 100% LTV or less. LTV requirements can vary by state, and thus interested customers should contact their local BB&T branch.
- Interest Rates: Rates could be as low as 3.24% for the first 6 months of the draw period, and 5.24% during the repayment period; however, rates and offers vary by state, so you should get a quote to determine your rate.
- Fees, Terms, and Everything Else: Applicants in AL, FL, GA, IN, KY, and NJ will be required to pay a $50 annual fee. Further, there is also a $50 servicing fee to set up the Fixed Rate option. In addition, borrowers who pay off their line of credit within 36 months may be required to pay closing costs.
Though M&T may not be as well known as some other lenders on this list, they offer competitive HELOC rates, and borrowers can access between $15,000 and $1 million in funds (maximum of $250,000 for vacation homes).
- Loan-to-Value Ratio: To be approved, you typically must have an LTV of less than 90%.
- Interest Rates: M&T Bank HELOC rates typically range between 2.99% to 15.90%
- Fees, Terms, and Everything Else: Eligible applicants in CT, DE, MD, NJ, NY, PA, VA, WV, and the District of Columbia may be eligible for a HELOC through M&T Bank. If approved, they can expect a draw period of 10-year and a repayment period of 20 years. There are no application fees and typically no closing costs; however, borrowers who repay their loan within 36 months may be required to reimburse M&T for any fees paid on the borrower’s behalf.
What Are the Benefits of a Fixed-Rate HELOC?
When choosing between a HELOC and a home equity loan, many borrowers are attracted to the flexibility offered by HELOCs. As a revolving line of credit, a HELOC can be used to finance a variety of expenses over the draw period, which typically ranges from five to 10 years.
The downside, of course, is that a HELOC typically carries a variable rate, which can leave the borrower vulnerable to increasing rates that can add a significant amount of interest over the life of the loan. Borrowers with a fixed-rate HELOC, however, don’t need to worry about this problem.
Are There Downsides to a Fixed-Rate HELOC?
While a fixed interest rate can potentially protect borrowers, it can also be a more expensive option, particularly if rates fall.
However, it’s also important to note that there are general risks associated with all HELOCs and home equity loans. If, for example, the borrower fails to meet their repayment obligations, they can default and risk foreclosure on their home. As such, borrowers should always be conscious of their budgets when determining how much money they should borrow at any given time.
The Bottom Line: Is a Fixed-Rate HELOC Right for You?
A HELOC often provides flexible funding for qualified homeowners, similar to a credit card. And while variable rates often make them more affordable at the onset, over time, rising rates can potentially make a home equity line more expensive.
With a fixed-rate HELOC, borrowers can avoid the risk of rising interest rates, though the opposite can also be true.
In the end, it’s important to weigh the pros and cons of each type of home equity product before making a final decision.