A fixed-rate HELOC lets you secure a portion of your home equity at a fixed interest rate, offering stability against market rate changes.
If you’re looking for a solution to high-interest debt, such as auto loans or credit card balances, at a lower interest rate, a fixed-rate HELOC (home equity line of credit) can be a solution. Unlike typical HELOCs with a variable interest rate that can change from month to month, a fixed-rate HELOC locks you in at one rate so you know exactly what you’ll be paying.
Some lenders allow you to choose a fixed rate during the application process, while others allow you to convert during the draw period. Read on to learn everything there is to know about fixed-rate HELOCs and how to get one.
What Is a Fixed Rate HELOC?
A fixed-rate HELOC is a home equity line of credit that has a consistent interest rate on any withdrawn funds, which differs from a typical HELOC that comes with a variable interest rate that can change from month to month.
“Since variable interest rates can fluctuate, switching to a fixed interest rate can provide more stability in your payments,” says Jose Garcia, president and CEO of Northwest Community Credit Union.
In other words, you’ll know exactly how much you’ll pay in interest with a fixed HELOC rate. You may have to pay a potentially higher interest rate for that convenience, though a good credit score (above 680) and a low debt-to-income ratio could help you snag a more favorable rate.
Interest rates are tied to a benchmark rate, such as the federal funds rate and margin rates. As of late January 2025, the average HELOC rate was around 8.25%.
With both a variable-rate HELOC and a fixed-rate HELOC, you can withdraw as much or as little of the available credit line as needed.
Applying for a Fixed-Rate HELOC
The step-by-step process for obtaining a fixed-rate HELOC is relatively simple. Here's an overview of the steps to take:
Research and Compare Lenders
Compare HELOC lenders’ interest rates, fees and terms to find the best option for your needs. Look at client reviews, ratings, total costs and approval criteria, then compare offers or estimates for your situation. Most lenders require a minimum credit score of 620, though this can vary.
Gather Necessary Documents
Necessary documents may include proof of income, such as W-2s or pay stubs, tax returns, bank statements, documentation of your home’s value, a tax assessment or a current appraisal.
Determine Your Loan Amount
The amount you can borrow depends on your home’s current value, your income, the equity you’ve built up on the home and your creditworthiness. Consider the maximum available and how much you need to borrow, then review available offers from lenders.
Submit an Application
Once you’ve settled on a lender, the final step is to apply. This can typically be done online or by visiting a branch. Fill out the application accurately and provide all required information, including any requested additional documentation, such as tax returns, property assessments or pay stubs.
Alternatives to a Fixed-Rate HELOC
Not sure if a fixed-rate HELOC is for you? Some common alternatives still allow you to tap into your home’s equity.
Variable Rate HELOC
Alright, hear us out. Yes, a variable-rate HELOC means your payments could fluctuate over time, but they might be a good choice depending on the fiscal environment at the time of application. For example, if the economy enters a decreasing-rate environment, your payments would go down.
Additionally, if you stick with a traditional HELOC, you could get a lower introductory rate than a fixed-rate HELOC.
This strategy comes with some risks, such as the economy entering an increasing-rate environment, so you should look closely at your financial situation and market forecasts before applying.
That said, some variable-rate HELOCs allow you to convert to a fixed rate further down the line.
Home Equity Loan
A home equity loan is similar to a HELOC in that you’re tapping into your home’s equity in exchange for capital. However, with a home equity loan, you receive a lump sum payment instead of a flexible line of credit.
Home equity loans have fixed rates, so they work more like a mortgage loan than a HELOC. You’ll make monthly payments on the principal balance and interest until the full amount is repaid. Like a HELOC, it’s secured by your house, so non-payment could result in foreclosure.
Home Equity Agreement
A home equity agreement, or HEA, is when a homeowner gives up a chunk of their home’s equity in exchange for a lump sum payment. An HEA works differently than a HELOC because it’s not a loan, per se, but a contract between the homeowner and an investor.
The investor will appraise a home before making an offer for a percentage of its equity. Once both parties agree to the terms, the investor provides a lump sum payment to the homeowner and puts a lien on the house until it's repaid.
Here’s the good news: You don’t have to make monthly payments on that loan. You will have to repay the amount you borrowed, plus any appreciation in the home’s value, at the end of the contract or when the house is sold, whichever comes first. If the home’s value decreases, so too does the amount you have to repay.
RELATED: HEA vs. HELOC
Why You Should Trust Us
Benzinga has offered investment and mortgage advice to more than one million people. Our experts include financial professionals and homeowners, such as Anthony O’Reilly, the writer of this piece. Anthony is a former journalist who’s won awards for his New York City economy coverage. He’s navigated tricky real estate markets in New York, Northern Virginia and North Carolina.
For this story, we worked with Jose Garcia, president and CEO of the Illinois-based Northwest Community Credit Union. The credit union offers multiple financial services, including HELOC loans.
Frequently Asked Questions
Is a fixed-rate HELOC a good idea?
It depends. While a fixed-rate HELOC means you’ll have consistent payments each month, you might be locked into a higher rate for that convenience. It might not be a good idea if the economy is in a decreasing-rate environment.
What is the current fixed HELOC rate?
As of late January 2025, the fixed HELOC rate was around 8.25%.
Can you pay off a HELOC early?
Yes, it’s possible to repay a HELOC early. However, some lenders might have penalties or fees for repaying your HELOC before the agreed-upon time. Check with your lender first.
Sources
- Jose Garcia, president and CEO of Northwest Community Credit Union
About Anthony O'Reilly
Anthony O’Reilly is an updates editor for Benzinga. He’s won numerous journalism awards for his coverage of the New York City economy and Long Island school district budgets.