HELOC interest rates can work differently from traditional mortgage rates because a HELOC commonly uses a variable rate, while many traditional mortgages have fixed rates for the loan term. With a variable-rate HELOC, the interest rate may change as the underlying benchmark changes, meaning your borrowing cost can increase or decrease over time. Traditional fixed-rate mortgages provide more predictable principal and interest payments because the interest rate remains fixed under the loan terms. This difference is important when comparing the two products because a lower starting HELOC rate does not necessarily mean the borrowing cost will remain lower. HELOCs can also have different fees, draw periods, repayment periods, and rate structures. You can learn more about these differences in our guide to HELOC fixed vs. variable options. When comparing products, consider both the current rate and how the payment could change in the future.
