What is a fixed rate equity loan?

About fixed rate home equity loans

A fixed rate home equity loan is a loan secured by the equity in your home with an interest rate that stays constant. Unlike an adjustable rate equity loan or equity line of credit, a fixed rate equity loan has a monthly payment that is more predictable and consistent. This means that, with a fixed rate loan, a sudden rise in interest rates should not effect your monthly payment.

Although fixed rate equity loans can sometimes have a higher initial interest rate than an adjustable rate equity loan, many borrowers take solace in the fact that the interest rate will not change during the life of the loan.

Unless you have some knowledge about a future interest rate plummet – or if you embrace the risk associated with an adjustable rate loan – it can often be wise to select a fixed rate equity loan. With a fixed rate loan, you won’t end up in a situation where your monthly payment creeps up every adjustment period.

You should discuss your loan options with one of your lender’s consultants and figure out is a fixed rate is the best option for you.