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Home Equity Loans
Fixed-rate HELOC: Why it could be for you
Updated May 14, 2023

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Key takeaways:
A fixed-rate HELOC combines the best features of a home equity loan (a fixed interest rate) and a home equity line of credit (the ability to borrow, repay, and borrow more during your draw period).
Home equity loans tend to have lower interest rates and more flexible credit requirements compared to personal loans.
With a fixed-rate HELOC, you will know upfront what your interest rate will be after the draw period ends, removing the uncertainty that comes with a variable-rate loan or credit card.
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You’re ready. Ready to get rid of your high-interest debt. Ready for that bathroom remodel. Ready to plan your wedding. The only question is how to finance your high-priority expense. A fixed-rate HELOC is a great solution for many homeowners.
With a fixed-rate home equity line of credit, you can borrow against your home equity to tackle just about any large expense or financial emergency. Since it’s a line of credit, you have the flexibility to borrow the amounts you need, without guessing on a lump sum loan amount that might turn out to be too little or too much. At the same time, the fixed interest rate gives you peace of mind that your costs are controlled and predictable.
What is a fixed-rate home equity line of credit (HELOC)?
A fixed-rate HELOC is a home equity line of credit that has a fixed interest rate (one that doesn’t change over the life of the loan).
Fixed-rate HELOCs are a blend of the best features of home equity loans and HELOCs. It’s a line of credit, so for the first few years, it works like a credit card. Unlike a credit card, however, this loan comes with a fixed interest rate, which protects you from fluctuations that could increase your cost of borrowing.
Fixed-rate HELOCs are hard to find. The vast majority of HELOCs come with a variable interest rate.
You’re ready. Ready to get rid of your high-interest debt. Ready for that bathroom remodel. Ready to plan your wedding. The only question is how to finance your high-priority expense. A fixed-rate HELOC is a great solution for many homeowners.
With a fixed-rate home equity loan of credit, you can borrow against your home equity to tackle just about any large expense or financial emergency. Since it’s a line of credit, you have the flexibility to borrow the amounts you need, without guessing on a lump sum loan amount that might turn out to be too little or too much. At the same time, the fixed interest rate gives you peace of mind that your costs are controlled and predictable.
What is a fixed-rate home equity line of credit (HELOC)?
A fixed-rate HELOC is a home equity line of credit with a fixed interest rate (one that doesn’t change over the life of the loan).
Fixed-rate HELOCs blend the best features of home equity loans and HELOCs. It’s a line of credit, so it works like a credit card for the first few years. Like typical home equity loans, this loan comes with a fixed interest rate, which protects you from fluctuations that could increase your cost of borrowing.
Fixed-rate HELOCs are hard to find. The vast majority of HELOCs come with a variable interest rate.
Fixed vs. variable HELOCs
Here’s a breakdown of the similarities and differences between three types of home equity loans: fixed-rate HELOCs, variable-rate HELOCs, and traditional home equity loans.
Loan feature | Fixed-rate HELOC | Variable-rate HELOC | Home equity loan |
---|---|---|---|
Funding | Draw funds as needed during the draw period | Draw funds as needed during the draw period | Receive one lump sum at funding |
Interest rate | Locked in when your loan is approved | Can vary during the draw period but may convert to a fixed rate when repayment period begins | Locked in when your loan is approved |
Borrowing limit | Typically around 80% of your appraised value | Typically around 80% of your appraised value | Typically 80%-95% of your appraised value |
Draw period | 5 years | 5-10 years | None |
Loan term | 5-30 years | 10-30 years | 10-30 years |
Minimum credit score needed | 600-700 | 620-700 | 620-700 |
How a fixed-rate HELOC works
A fixed-rate HELOC combines the best features of home equity loans (the fixed interest rate) and home equity lines of credit (the ability to borrow and pay back funds continuously for a period of time). Here's a basic run-down of how a fixed-rate HELOC works.
HELOC draw period
A HELOC has a draw period, which is a number of years (typically five-10) during which you can borrow repeatedly, up to your loan limit.
During the draw period, you can borrow, repay, and borrow again as often as you like. You’ll make a monthly payment in proportion to the amount of money you’ve drawn.
At the end of the draw period, the repayment period begins, and you may not withdraw any more funds. Your monthly payment will be set to a fixed amount that will pay off your entire balance over the loan’s term (typically 10 to 25 more years). Some home equity loans have a longer repayment period, which gives you a lower monthly payment but means you’ll pay more in interest over the life of the loan.
HELOC payments
With a traditional HELOC, you might only have to make interest payments during the draw period. However, if you make interest-only payments, you're not paying down what you owe. Then, when the draw period ends, your payment could go up sharply because you’ll have to start making a regular principal plus interest payment each month.
In contrast, a fixed-rate HELOC through Achieve Loans allows you to begin repaying your principal balance and interest from day one. This lets you make progress against your debt. Also, you get a consistent and manageable monthly payment throughout the life of the loan. The only way your payment would spike when your draw period ends is if you borrowed more at that time.
HELOC interest rates
With a fixed-rate HELOC, the interest rate is locked when your loan is approved. Your rate will depend on your credit score and other factors in your credit history.
Whether you’re in your draw period or the repayment period, you’ll only pay interest on the amount you actually borrow, not on any additional credit limit that is or was available to you.
Traditional HELOCs come with a variable interest rate, which makes it harder to predict what your monthly payment will be in the future. Variable interest rates leave the borrower at the mercy of market conditions. Most variable rates are tied to a benchmark, such as the Federal Reserve's federal funds rate. When rates are rising, you can expect your variable-rate loan or credit card to get more expensive.
Opting for a variable-rate HELOC means your interest rate and payment could change over time. With a fixed-rate loan, you are protected from rising interest rates.
HELOC minimum draws
HELOCs sometimes have a minimum loan amount and/or a minimum initial draw amount. If the lender has a minimum initial draw, you have to borrow at least that much money when your loan closes. If you didn’t need that much yet, you could repay it to save on interest charges, and draw it when you need it.
HELOCs also have a maximum. The maximum loan amount is calculated in two ways, and your limit will be the lower of the two:
A dollar figure. Lenders set their own maximum loan amount. No matter how much equity you have, you can’t borrow above this limit.
A percentage of your home’s value. This is called the combined loan-to-value ratio (CLTV) and includes your primary mortgage if you have one. Together, your mortgage balance and the new home equity loan may not exceed the lender’s CLTV limit.
Is a fixed-rate HELOC a smart option?
A HELOC is a great idea under certain conditions, such as when you:
Have enough home equity to borrow against
Need at least $15,000
Want to use a lower interest HELOC to pay off higher interest debt
Aren’t sure how much money you’ll need, and you want to have access to funds over time
A fixed-rate HELOC is also a solid option when you want to:
Repeatedly borrow and repay for the next few years, but without the high interest cost associated with credit cards
Have a line of credit without a changing interest rate
Borrow money to improve your home
Finance a large expense, and a traditional personal loan won’t give you enough time or money
Pros and cons of a fixed-rate HELOC
A fixed-rate HELOC combines the best features of home equity loans and HELOCs, but it’s not the right solution in every situation.
Fixed-rate HELOC pros
Draw period. A fixed-rate HELOC allows you to borrow repeatedly, up to your loan limit, for your entire draw period. In contrast, traditional home equity loans are for one lump sum given to you the day your loan closes.
Fixed interest rate. If you opt for a fixed-rate HELOC, your interest rate is set when your loan is approved. In contrast, a variable-rate HELOC could leave you with some financial uncertainty.
Competitive rates. HELOCs tend to have lower interest rates compared with other borrowing options like credit cards. That’s because your home guarantees the loan, which lowers the risk to the lender.
Fixed-rate HELOC cons
Not for small expenses. If your financial need is smaller than the minimum draw amount, it may make more sense to look at a personal loan instead.
Won’t work for every borrower. If you don’t qualify for an interest rate you’re happy with, you might want to consider a cash-out refinance loan instead. That’s a new mortgage that replaces your old one. Primary mortgages tend to have lower interest rates than HELOCs.
Pros | Cons |
---|---|
Allows you to borrow what you need | Minimum draw might be more than you need |
The interest rate is set when the loan is approved | Cost of borrowing is higher than a primary mortgage |
Tend to have lower interest rates than other methods of borrowing |
|
Who should consider a fixed-rate HELOC?
Fixed-rate HELOCs are rare, but you can find them. Achieve Loans offers a fixed interest rate and a five-year draw period, combining the most popular features of home equity loans and HELOCs.
If any of the following points apply to you, you may be the perfect candidate for a fixed-rate HELOC:
You don't like the uncertainty of an interest rate and a loan payment that can increase at any time.
You like the idea of being able to withdraw money only as needed and reborrowing it once it's been paid back.
You have a large project to pay for and may need a repayment period longer than you can get with a large personal loan.
Home equity loan from Achieve Loans
The Achieve Loans home equity loan is a fixed-rate HELOC. It has a low fixed interest rate and a five-year draw period , with a total loan term up to 30 years. This maximizes the flexibility of using the funds to cover a large expense.
If you use the loan to pay off other debts, you might be approved even with a lower credit score. Members who take an Achieve Loans home equity loan for debt consolidation save an average of $10,000 per year.
If you’re happy with your current mortgage, you can leave it just the way it is. You can take advantage of an Achieve Loans home equity loan without making any changes to your current home loan.
An interest rate discount may be available when you sign up for automatic payments, and loan decisions are often made in minutes. Qualified applicants can get their loans approved and funded in as little as 10 days.
At Achieve Loans, it’s not what we stand for but who. We help real people reach real goals. Contact us today. Our loan consultant will listen to your situation and help you understand your options. We’re committed to helping you choose the right program to meet your goals.
Author Information

Written by
Dana is an Achieve writer. She has been covering breaking financial news for nearly 30 years and is most interested in how financial news impacts everyday people. Dana is a personal loan, insurance, and brokerage expert for The Motley Fool.

Reviewed by
Jill is a personal finance editor at Achieve. For more than 10 years, she has been writing and editing helpful content on everything that touches a person’s finances, from Medicare to retirement plan rollovers to creating a spending budget.
Frequently asked questions
Is a fixed-rate better than a variable-rate HELOC?
Any HELOC can be an excellent way to finance a large project. However, if you want to know precisely how much your interest rate will be throughout the life of the loan, a fixed-rate HELOC is definitely the better option.
How does a home equity loan work?
A home equity loan allows you to borrow money against your home equity. Once a lender determines how much you could borrow based on your home's current value and how much equity you have built up, they check factors like your credit score, income, and debt-to-income (DTI) ratio to determine whether you qualify.
Once you're approved for a traditional home equity loan and sign a loan contract, you'll receive the loan money in a single lump-sum payment that you'll repay in equal installments over a set period. Most home equity loans have a fixed interest rate.
The Achieve Loans home equity loan is a fixed-rate HELOC that lets you borrow, repay, and borrow more as often as you like, up to your credit limit, for the first few years after your loan is approved.
What are the differences between a home equity loan and a HELOC?
With a traditional home equity loan, you receive loan money in a single lump-sum payment. With a HELOC, you can borrow as needed, repay, and borrow again for the first few years after you get the loan.
Traditional home equity loans have a fixed interest rate. Traditional HELOCs have a variable interest rate. A HELOC from Achieve Loans has a fixed interest rate.
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