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Homeowners with Home Equity Lines of Credit (HELOCs) often enjoy the flexibility and lower initial rates that these financial products offer. However, with rising interest rates and changing financial goals, many consider converting their HELOC into a fixed-rate home equity loan. Knowing when and how to make this switch can save money and bring much-needed financial predictability.
In this guide, we’ll break down everything you need to know about converting a HELOC into a fixed-rate home equity loan, including when it’s the right move and how to time it wisely.
Understanding the Basics
What is a HELOC?
A HELOC is a revolving line of credit secured by your home’s equity. It typically has a variable interest rate, allowing borrowers to draw funds as needed during a draw period (usually 5–10 years), followed by a repayment period.
What is a Fixed-Rate Home Equity Loan?
A fixed-rate home equity loan is a lump-sum loan secured by your home with a fixed interest rate and regular monthly payments over a set term—much like a traditional mortgage.
Why Convert from a HELOC to a Fixed-Rate Loan?
- Stability Amid Rising Rates
Variable-rate HELOCs can become expensive if interest rates rise. A fixed-rate loan offers predictability and shields you from market volatility. - Structured Repayment
A home equity loan enforces disciplined repayment through fixed monthly payments, helping homeowners budget more effectively. - Long-Term Planning
Converting helps align with long-term goals like retirement or debt consolidation where consistent payments are essential. - Avoid Payment Shock
After the draw period ends, HELOCs often transition to a higher interest repayment phase. Locking in a rate before this can be financially wise.
When is the Right Time to Convert?
1. Interest Rates Are Rising
If market trends suggest that variable rates will increase, locking in a fixed rate can protect you from escalating payments.
2. End of Draw Period Near
As you approach the end of your HELOC’s draw period, your payments may spike due to principal and interest requirements. This is an ideal time to convert.
3. Improved Credit Score
If your credit score has improved since you opened the HELOC, you might qualify for a better fixed rate.
4. Life Events
Major life changes—such as retirement, new employment, or expanding your family—can benefit from the predictability of fixed payments.
How to Convert Your HELOC
- Review Your Current Terms
Check your HELOC agreement for any conversion options, penalties, or fees. - Contact Your Lender
Some HELOCs offer built-in options to convert to a fixed rate for all or part of the balance. If not, you may need to apply for a separate home equity loan. - Compare Loan Offers
Shop around with multiple lenders for competitive fixed-rate home equity loan offers. Look at APR, fees, and repayment terms. - Apply and Close
Once approved, your new loan will pay off the HELOC, and you’ll begin making fixed monthly payments.
Want personalized advice on your home financing options? Contact our home loan experts today.
Pros and Cons of Converting a HELOC
| Pros | Cons |
| Stable monthly payments | Potential closing costs or fees |
| Protection from interest rate hikes | May lose HELOC flexibility |
| Predictable loan term | New loan application process may be required |
Frequently Asked Questions
Can I convert just a portion of my HELOC to a fixed rate?
Yes, some lenders offer the ability to fix only a part of your HELOC balance, leaving the rest variable for added flexibility.
Will I need to requalify if I convert?
If your HELOC has a built-in conversion feature, you may not need to requalify. Otherwise, applying for a new loan typically involves credit checks and income verification.
Are there fees for converting?
There may be origination fees, closing costs, or early repayment penalties. Review your HELOC agreement and compare lender terms.
Read Next
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By understanding the timing and process of converting your HELOC to a fixed-rate loan, you can make confident decisions that protect your finances and support your long-term goals.
Unlock Your Home Equity with Figure
- Approval in 5 minutes. Funding in as few as 5 days
- Borrow $20K-$400K
- Consolidate debt or finance home projects
- Fastest way to turn home equity into cash
- 100% online application
Our advice is based on experience in the mortgage industry and we are dedicated to helping you achieve your goal of owning a home. We may receive compensation from partner banks when you view mortgage rates listed on our website.
