When you need extra funds, a home equity line of credit is a great option . A HELOC is a revolving line of credit that is secured by your home’s equity (value), and you can borrow from it as needed. Most HELOCs have variable rates, meaning your interest rate can rise and fall based on market conditions.
BECU also offers a fixed-rate advance option that allows you to lock in some or all of your HELOC balance at a low fixed-rate to potentially save money over time. The balance locked then moves to a term loan with term options up to 15 years.2 At BECU you only pay interest on what you borrow with no annual or origination fees. 3
Fixed-Rate Advance Features & Benefits
- It's a term loan (like a car loan). This means you can set your term and have a consistent monthly payment.
- Fixed-rate means more predictability.
- Set payment is helpful for planning purposes.
What is a HELOC with a Fixed-Rate Advance?
The fixed-rate HELOC advance option allows you to lock in a portion of your balance at a fixed-rate. These are a subset of your primary HELOC and can be paid off at any time which then opens back up the funds on your line. A fixed-rate advance HELOC gives you flexibility, allowing you to lock in the interest rate throughout the life of the loan. If you prefer the predictability of knowing what your payment will be from month to month and having the comfort of a fixed-rate in a rising interest rate environment, a fixed-rate advance could be the perfect solution for you.
Fixed-Rate Advance Considerations
- Fees – There are no fees to open a Fixed-Rate Advance. In general, the terms are spelled out in your loan opening documents.
- Term– You decide what length of loan (term) you would like. You can choose between 1-15 years, and there is no difference in rate for longer terms.
- Rates – Rates vary and are typically slightly higher than variable-rate HELOCs, but unlike a variable-rate HELOC, once locked in the rate does not fluctuate due to market conditions.
When to use a Fixed-Rate Advance
There are times when converting a variable HELOC to a fixed-rate is the best choice. Whether it's a home renovation project or a large unexpected expense, it's wise to examine both variable-rate and fixed-rate options to make the right decision for your needs.
- Remodeling - A fixed-rate loan can be the perfect solution when remodeling a home. Throughout construction, your interest rates on a variable-rate HELOC could fluctuate, landing you at a higher rate while the renovation is in progress.
- Family emergencies - Should funds not be available for large ticket items such as medical procedures or financial emergencies, taking out a fixed rate advance provides predictability and peace of mind, as the fixed payment will not change over the life of the loan.
- Debt consolidation - Did you use a credit card for holiday spending? Maybe even a couple different cards? If so, consolidating your debt from those high rate cards is easy to do. Once this balance is initially moved to our HELOC, you can always fix that balance just as with any other situation.
Unlike a personal loan a fixed-rate advance does not limit you to just one loan — you can take up to three fixed-rate advances. You can even take out a fixed-rate advance on the entire HELOC amount, and with the fixed interest rate, you'll know exactly what your payments will be so you can plan for them.
How to Convert to a Fixed-Rate Advance
If you already have a HELOC, and want to transfer to a fixed-rate, there are options. You can take out any sum up to your HELOC maximum at any time during the HELOC's 1-10 year draw period for fixed-rates. Here's how it would work:
In general, depending on what you are trying to accomplish, opting for a fixed rate advance may be right for you. You'll want to weigh the options and make sure you can afford the monthly payment since it is not interest only. Variable rate advances are interest-only up to 10 years. 15 year advances follow different rules and will have amortized principle and interest payments. If you are still unsure about how a fixed-rate advance works or would like more details around current interest rates or options, don't hesitate to contact us.
1 You must open and maintain BECU membership with a Member Share or Member Advantage savings account in order to obtain a Home Equity Line of Credit (HELOC); not all applicants will qualify for membership. Financing is subject to credit approval and other underwriting criteria. The specific credit limit will be determined based on information obtained while processing your application, which includes, but is not limited to: your credit report, your income, occupancy, and available equity in your home; not all applicants will qualify. BECU must be able to perfect a first or second mortgage lien on your one-to-four family residence. Insurance to protect the property against hazards (including flood insurance, if applicable) is required. Borrower is also required to pay for optional services (e.g. if borrower retains an attorney that borrower is not required to use). Additional state or local mortgage fees or taxes may apply. In South Carolina, where the law requires use of an attorney, BECU will be solely responsible for paying all attorneys' fees and costs necessary to open the HELOC, and will perform this responsibility fully by paying all reasonable attorneys' fees and costs related specifically to the closing based on rates typically charged by attorneys in the local market for the closing of similar HELOC transactions. Loan programs, terms, and conditions are subject to change without notice. The APRs for BECU's HELOCs are variable and are based on the highest Prime Rate as published in the Wall Street Journal as of the date of any rate adjustment plus an applicable margin. Current HELOC rates range from 3.59% APR – 8.59% APR as of 1/1/2021 and are subject to change. The maximum APR that can apply to BECU's HELOCs is 18%. APRs do not include costs other than interest.
2 The rate for a Fixed Rate Advance (FRA) is 3.84% APR to 9.99% APR as of 1/1/2021. You may convert all or a portion of your outstanding HELOC variable-rate balance to a FRA. The minimum outstanding balance that can be converted into a FRA is $5,000 from a HELOC account. No more than three FRAs may be open at one time. Contact a BECU representative for current information.
3 During the HELOC draw period, your monthly payment will equal the amount of accrued interest, subject to the lesser of $100 or your outstanding balance. Because the minimum monthly payment during the draw period is interest only, your principal balance may not be reduced. At the end of the draw period, your monthly payment will increase and equal the amount of principal and interest necessary to pay off the loan balance by the end of the 180 month repayment period. Your payments during both the draw and repayment periods will not include amounts due for property taxes and insurance