How Often Can the Interest Rate Change on a HELOC? Everything You Need to Know

HELOC interest rates can change as often as every month, depending on your lender and the terms of your loan. Most home equity lines of credit have variable rates tied to an index, such as the prime rate, which fluctuates based on market conditions.

Understanding how often these changes occur—and their potential impact on your payments—is crucial for managing your loan.

Table of Contents

1. What causes HELOC interest rates to change?
2. Will I be notified if my interest rate changes?
3. How do interest rate changes affect my monthly payment?
4. Is there a maximum rate that HELOCs can’t exceed?
5. Can I choose between a fixed and variable rate? 
6. What if my interest rate becomes higher than I can afford?
7. When to consider HELOC alternatives

What causes HELOC interest rates to change?

If your HELOC has a variable rate, your interest rate isn’t locked in for the entire term. It’s tied to an index rate—a rate that mirrors the performance of a specific financial product (or bundle of them). 

The prime rate is a common index that HELOCs are tied to. This tracks the rate that banks pay to borrow from each other. In this example, when the prime rate changes, so would the rate on your HELOC. These changes can happen on a monthly or quarterly basis.

To calculate your interest rate, your lender takes your margin—the buffer it builds in based on your credit profile and risk factors—plus the index rate your HELOC is tied to.

For example, if the index rate is 5%, and your margin is 2 percentage points, your interest rate is 7%.

This rate (and your payment) could change as often as every month.

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Tip

Some lenders may offer a special fixed introductory rate for a short period, with a variable rate following once the introductory period ends. Some lenders offer fixed-rate HELOCs for the entire term.

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Will I be notified if my interest rate changes?

Yes. Before you accept the terms on your line of credit, the lender will provide a disclosure detailing how often your rate can change and how high that rate can go.

Your lender is required to include any upcoming rate increase in your monthly statements. So if it expects your rate to rise in November, you’ll see the new rate reflected in your October statement, before November’s payment is due.

How do interest rate changes affect my monthly payment?

Interest rate changes affect your monthly payments during the draw and repayment periods. In the draw period, typical payments are interest-only, so the impact of a rate increase depends on how much you’ve spent. The higher your balance, the more interest you’ll pay.

In the repayment period, rate increases are more pronounced because you’re paying down principal and interest.

Here’s a look at how HELOC payments can change on a $50,000 balance during a 10-year repayment period:

Scenario	Interest rate	Monthly payment
🔒 Fixed-rate HELOC	5%	$530.33
⬆️ Variable-rate HELOC (rate increases)	4.5% → 6%	$518.19 → $555.10
⬇️ Variable-rate HELOC (rate decreases)	4.5% → 3.5%	$518.19 → $494.43

Variable rates can be helpful when they’re lower than fixed rates. However, when your rate begins to fluctuate, your payment can be unpredictable.

Interest-rate fluctuations can influence your long-term costs as a borrower, but there’s no way to calculate these costs because they vary based on factors including: 

• How often the interest rate adjusts 
• Your balance 
• Your rate cap 
• The term of your HELOC 

Is there a maximum rate that HELOCs can’t exceed?

Most lenders cap on your interest rate at 18%—meaning it won’t rise above that amount during your loan term—although only credit unions are required to abide by that cap.

Some lenders limit how much your rate can increase at each adjustment, and others may have a floor rate—the lowest rate possible if the index rate falls. 

Your rate cap is laid out in your loan paperwork, so be sure to read the fine print before closing on your HELOC. You can also have an attorney or financial advisor review the terms before signing your final documents.

Can I choose between a fixed and variable rate? 

Your rate options depend on the lender. Some lenders offer fixed- and variable-rate options from the start, but others may offer the option to convert your HELOC to a fixed rate at a later date. 

Here are a few examples of lenders and what types of HELOC rates they offer:

Lender	Variable rate	Fixed rate
Figure	Not available	Lifetime rate
Spring EQ	Initial rate	Not available
Bethpage FCU	Lifetime rate	On introductory rate and if you convert to a fixed-rate loan

Typical fixed rates might be higher than variable rates at the start of the HELOC term. Long-term, it’s impossible to predict which option will be the most affordable because variable rates fluctuate throughout the term.

What if my interest rate becomes higher than I can afford?

If your HELOC has a variable interest rate, and that rate increases while you’re repaying what you borrowed, your monthly payment could be higher than what you can afford.

If this happens, you should contact your lender. It can lay out your full range of options, which might include a hardship program or restructuring your terms.

You can also:

• Convert it to a fixed-rate HELOC: Some lenders will let you convert your adjustable-rate HELOC to a fixed rate. This gives you a consistent rate and payments.
• Convert it to a fixed-rate installment loan: You might be able to turn your HELOC balance into an installment loan. You’d then pay this back with fixed monthly payments over time.
• Refinance the HELOC: You may be able to refinance into a new HELOC with a fixed rate or into a home equity loan with a fixed rate. You might also pursue a cash-out refinance of your first mortgage. You could use the cash to pay off your HELOC balance, rolling it into another loan.

While these methods can offer relief if your variable-rate payments get out of hand, they’re not guaranteed. All loan options depend on your credit and finances. If you’re concerned about managing fluctuating rates and payments, you may want to explore a fixed-rate financing product below. 

Find out more about converting a HELOC to a fixed-rate loan.

When to consider HELOC alternatives

If you’re worried about the unpredictability of HELOCs or your ability to make consistent HELOC payments, you can explore other options. Failing to make your HELOC payments could cause you to lose your house, so another product with a fixed interest rate may be best for you.

You should also take into account the current interest rate environment. If rates are projected to rise in the near term, it could have a significant impact on your costs as a borrower. 

Other options you might explore include:

• Home equity loan: Offers a fixed interest rate with consistent payments and long terms (up to 30 years). However, it adds a second monthly payment, and interest is only deductible if the funds are used for home improvements. (Best home equity loans)
• Personal loan: Provides a fixed interest rate with consistent payments. It’s unsecured, so it doesn’t put your assets at risk. On the downside, personal loans usually have higher rates than home equity products, and the interest is never tax-deductible. (Best personal loans)
• Cash-out refinance: Can have either a fixed or variable interest rate. It offers lower rates compared to other products and allows for tax-deductible interest. The main drawback is that it replaces your current mortgage terms, which may not align with your goals.(Best cash-out refinance companies)