Convertible HELOC
Your HELOC may already have a conversion option; some even give you more than one chance to convert during the life of the loan.
Keep in mind this may not be a great deal. The fixed-rate repayment period after the conversion may be longer, stretching out interest payments over a longer period of time. Also, at times, a variable interest rate is preferred to a fixed rate. And a convertible HELOC may charge higher fees.
Still, this is an option worth considering if you’d like a hybrid between a variable-rate HELOC and a fixed-rate HELOAN.
- Is there a charge for the conversion? If so, how much is it?
- Will I be able to use the remaining credit available on the line after a conversion?
- Does the loan convert to a new fixed loan (for example, with a 30-year term), or is the balance amortized over the remaining term of the existing loan?
- How many times can I convert?
- How often can I convert?
- What determines the new fixed interest rate?
As always, make sure you fully understand the terms of the loan and the total long-term cost before signing on.