Fixed Rate HELOC: Dealing with the Upswings

2007-03-08 10:33:40

( Insurance )



The latest move of the Federal government to increase interest rates will surely affect those with loans that are not under a fixed rate program.

THE UNCERTAIN INTEREST RATE

Because interest rates are based on prevailing trends, most borrowings have variable interest rates to adapt to the interest variations in the market. This can be a gamble because there is no discernible pattern to predict the movement of interest rates.

While some are fine with loans under a variable rate arrangement, most would prefer a fixed rate plan. Having fixed rates gives your household a consistent amount around which you can budget your monthly income. Having debts with a fixed rate allows you to properly distribute your cash flow and plan your spending.

If you have a HELOC or home equity line of credit, the increase in interest rates is a plausible cause for concern in light of how much HELOC rates have gone up over the recent years. However, for those under a fixed rate HELOC there is no need to worry because the fixed rate is dependent of such changes.

A CONTROLLED CREDIT LINE

A HELOC is a credit line made available for you based on the equity of your property or home. Lenders will make an appraisal of your home and offer you an amount that will serve as your line of credit. You may take out the entire line or just a portion of it, or may not avail of the line at all.

HELOC’s are becoming more and more popular, but the uptrend in rates may discourage a lot of borrowers. To offset these concerns, banks and other lenders have been offering a fixed rate HELOC to control the upswing in interest rates. A fixed rate HELOC will enable you to use your home equity line of credit as you will without any fear of being caught in the interest rate uptrend.


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