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What Is a Fixed-Rate HELOC?

A fixed-rate HELOC is a home-equity line of credit that lets you lock in a fixed rate on some or all of your loan balance.

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By Daria Uhlig

Written by

Daria Uhlig

Freelance writer

Daria Uhlig has over 16 years of experience in mortgage and real estate. Her work has been featured by GoBankingRates, MSN Money, and Yahoo Finance.

Edited by Reina Marszalek

Written by

Reina Marszalek

Senior editor

Reina Marszalek has over 10 years of experience in personal finance and is a senior mortgage editor at Credible.

Updated January 16, 2025

Editorial disclosure: Our goal is to give you the tools and confidence you need to improve your finances. Although we receive compensation from our partner lenders, whom we will always identify, all opinions are our own. Credible Operations, Inc. NMLS # 1681276, is referred to here as “Credible.”

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A fixed-rate home equity line of credit, or HELOC, is a line of credit you repay at a fixed rate of interest. It allows you to use a revolving line of credit, similar to a credit card, so you can borrow up to your limit, and pay down your balance to reuse the credit line. While a credit card is unusually unsecured, a HELOC is secured by the equity in your home.  That makes a HELOC a mortgage loan — a second mortgage, if you already have a mortgage loan.

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How does a fixed-rate HELOC work?

Some HELOCs have fixed rates on part of the balance, or on the entire loan balance, for the entire term of the loan. Others are variable-rate loans that allow you to lock in a fixed rate for some or all of your balance, whether temporarily or for the entire loan term. You’ll select the fixed-rate option when you first take out the loan or during the time you’re allowed to draw out cash from your line of credit.

“HELOCs are best for homeowners with substantial equity in their homes who require money for projects such as renovation, education, or debt consolidation,” says Reilly James Renwick, chief marketing officer at Pragmatic Mortgage Lending. “They are particularly helpful if one requires flexibility — that is, drawing money over time rather than all at once.”

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Note:

When a lender approves your application for a HELOC, it specifies a credit limit, which is the maximum amount you can have outstanding at any given time. Lenders usually cap the limit at 80% or 85% of your home’s value.

During the draw period, which typically lasts for 10 years, you can draw money against your credit line whenever you want. Although you’ll make interest payments on these draws, you won’t have to make principal payments. But you may repay some or all of the principal and reuse the credit line.

After the draw period ends, the repayment period begins. You won’t be able to draw more money from the credit line at this point, and you’ll begin repaying the loan principal in addition to all of the interest that has accrued.

HELOC repayment periods usually last 10 to  20 years. You’ll pay the same amount each month on the portion of your loan balance that has a fixed rate, and your last scheduled payment will repay that amount in full.

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Keep in mind:

Your HELOC likely will be due in full if you sell your home before the repayment period ends.

Pros and cons of fixed-rate HELOCs

HELOCs in general, and HELOCs with fixed interest rates in particular, have benefits and risks you should be aware of.

Here are some fixed-rate HELOC pros and cons:

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Pros

  • You can draw funds as needed, like with a credit card, and only pay interest on the amount used.
  • HELOC rates are lower than rates on other types of credit, such as personal loans and credit cards.
  • Fixed-rate HELOC payments stay the same over the entire repayment period, and they repay the loan in full — no balloon payment required at the end of the term.
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Cons

  • Your home secures the loan, so defaulting on your payments can result in foreclosure.
  • Borrowers can experience “payment shock”. “This is when, mostly, borrowers get shocked after the transition from the draw period interest-only payments to the repayment phase, where the borrower has to pay interest plus principal,” Renwick explained.
  • Fixed-rate HELOCs have higher rates than variable-rate HELOCs, at least to start.

How to obtain a fixed-rate HELOC

It’s a good idea to compare rates and loans from different lenders to ensure that you get the lowest available rate and the most favorable loan terms. A good first step is to pick a few fixed-rate HELOC lenders to compare, and request a quote from each. 

Once you’ve decided which lender to apply with, gather the documentation you’ll need for your loan application. That might include:

  • Social Security number
  • Employer’s name, address, and phone number
  • Driver’s license or other government-provided photo ID
  • Most recent pay stubs, 1099s, and other income statements
  • Two most recent W-2 forms
  • Two most recent federal income tax returns

Many lenders have online applications, but you can also call or make an appointment at a local branch office. The lender will provide the annual percentage rate, lender fees, the draw and repayment terms, and other important information when or before you apply.

The lender will schedule the closing after it approves your loan, and it’ll send you a disclosure as required by the Truth in Lending Act a few days before closing. This disclosure has the loan information you received when you applied, including the final terms. Ready it carefully as soon as you receive it. In most cases, you’ll have three days after you receive the disclosure to cancel the loan. 

Is a fixed-rate HELOC right for you?

A HELOC might be a good idea if you have enough equity in your home to qualify, and you want the ability to borrow against it periodically rather than receive the funds in a lump sum. Common uses for HELOCs include home remodeling and major repairs, college tuition, debt consolidation, and other major expenses. 

Fixed-rate HELOC FAQ

Can I convert my existing variable-rate HELOC to a fixed-rate?

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Are fixed-rate HELOCs more expensive than variable-rate HELOCs?

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How long can I lock in the fixed rate on a HELOC?

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Do all lenders offer fixed-rate HELOCs?

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What happens if interest rates decrease after I lock in a fixed-rate HELOC?

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Meet the expert:
Daria Uhlig

Daria Uhlig has over 16 years of experience in mortgage and real estate. Her work has been featured by GoBankingRates, MSN Money, and Yahoo Finance.