Mar 15, 2019 / Home Equity
One of the hardest parts of having a variable rate interest loan is the unknown. You don’t have a crystal ball and you can’t predict the future. You don’t know what the market will look like a few years down the road. And that means you don’t know the exact interest rate you’ll have to pay. But not all HELOCs are created equal. Some have a feature that allows you to lock in a fixed interest rate at any time. You can even swing between variable and fixed interest whenever you want. It’s called a swing out feature and every home equity loan should have one.
With a HELOC, you don’t pay interest until you draw money on your line of credit. It’s already a strategic borrowing option. And when you add a feature that allows you to switch between fixed and variable interest rates, you can use strategy to save you money. When interest rates are on the rise, you can lock in a fixed interest rate. And if they come back down again, you can swing back to a variable rate. In the meantime, you are saving money on your monthly payments by taking advantage of the options available to you.
Again, one of the hardest parts of having a variable interest rate is uncertainty. But with a swing out feature on your loan, that uncertainty is softened. You now control your own interest fate. And that means you have much more control over your monthly payment as well. Fear of the unknown often holds people back from using their home’s equity to make repairs, improvements, or for a number of other uses. But when you know what to expect from your interest rate and have control over your loan, you can mitigate your risk and make a more accurate repayment plan.
If you’re ready to borrow money and you’re unsure which interest option is right for you, a HELOC with a swing out feature gives you the best of both worlds. It doesn’t force you to choose between borrowing a lump sum of money now (as you would with a traditional fixed rate loan) and having the borrowing flexibility of a HELOC. It also doesn’t make you choose an interest rate or borrow solely at the mercy of the market rates. In short, this type of loan lets you borrow money on your terms and doesn’t pressure or pigeonhole you into a set path. And your loan can be tailored to suit your needs as you see fit.