How to Get the Best HELOC Rates
If you’re wanting to make improvements to your home, consolidate your debt, or get funds to pay for education, medical expenses, or vacation, and you own your home and have built up equity, a home equity line of credit (HELOC) can be a great option for you. A HELOC is one of the smartest ways to borrow money when you need extra funds. But as with any kind of loan or line of credit, it’s important to do your research and find the best deal that will work for you and your finances. If you decide that a HELOC is right for you, here are some tips on how to get the best HELOC rates.
How HELOCs Work
A HELOC is a revolving line of credit that you can borrow from as needed, similar to a credit card. You’re provided with a credit limit that you can borrow against when you need it, plus interest, and you pay it down over time. A HELOC is secured by your home’s equity, or the value built up in your home, so essentially your equity serves as your limit for the line of credit. Most HELOCs have variable rates, meaning your interest rate can vary based on current market conditions. Robins Financial offers both variable rate HELOCs and fixed rate advances on HELOCS.
Choose Your Lender
When searching for lenders that offer HELOCs, a great place to start is your credit union. Robins Financial offers great low rates on our variable and fixed rate options, so you can compare to see which works best for you. If you have loans or accounts with another lender or financial institution, like a mortgage lender or a bank, you can also look up their rates for comparison. Additionally, you can try finding a website that aggregates interest rates from multiple lenders and can provide preliminary quotes. It’s never a bad idea to get multiple quotes to compare. But keep in mind that any quotes you may receive during the initial research phase are not set in stone; you still need to go through the formal application phase to receive your final rate, which may vary based on the additional financial information obtained during the underwriting process.
Choose Your Rate Option
As we mentioned, most HELOCs have variable rates, which means that your interest rate can increase or decrease based on current market conditions. Lenders set their interest rates according to the current prime rate, which is determined by the federal funds rate. When interest rates go down, so will your monthly payment; when rates go up, so will your payment. Although your loan will have a maximum interest rate, it may be much higher than your initial rate. Additionally, there is no way to know ahead of time how the market rates will change, so you may not always be able to prepare for an increase in your monthly payment. But if rates drop, then you have extra room in your monthly budget that you can then allocate toward other needs or put it into your savings.
We also offer a fixed rate advance for HELOCs, which allows you to lock in your HELOC balance in part or in full at a low fixed rate to help you save even more. A HELOC fixed-rate advance provides the predictability of knowing what your payment amount will be from one month to the next, giving you more flexibility with the rest of your budget. Unfortunately, if interest rates drop below the rate you locked in, your interest rate will still remain the same. But knowing exactly what your payment amount will be month to month makes it easier for you to plan ahead and you’ll always be prepared when it’s time to make your payment.
If a Robins Financial Home Equity Line of Credit could be right for you, apply online, give us a call, or make an appointment at any of our branch locations.
At Robins Financial Credit Union, our mission is to enhance the financial well-being of our members and community. We honor this commitment by providing educational content to help you make the most of your finances. Read our other blog articles to help you gain the financial knowledge you need to succeed.