Regular HELOC vs. HELOC Fixed-Rate Loan Option (FRLO): Which Is Right for You?

What Is a Regular HELOC?

A regular HELOC works like a revolving line of credit secured by your home’s equity. It allows you to borrow funds up to a pre-set limit whenever you need them. The standout feature of a regular HELOC is its variable interest rate, which can change based on market conditions. This can be both an opportunity and a risk:

• Lower interest rates could mean reduced monthly payments.
• Rising interest rates, however, might increase your payments, making long-term budgeting more challenging.

A regular HELOC is a great option if you prefer flexibility and plan to use the funds for short-term or variable expenses.

What Is a HELOC Fixed-Rate Loan Option (FRLO)?

A HELOC Fixed-Rate Loan Option (FRLO) allows you to lock in a fixed interest rate on a portion or all of your HELOC balance. This converts the selected amount into a structured loan with consistent monthly payments over a specified term.

Key Benefits of a FRLO:

• Stability: Your interest rate and payments remain the same, regardless of market changes.
• Budgeting ease: Fixed payments make it easier to plan for long-term expenses.
• Peace of mind: Protects you from rising interest rates.

However, choosing a FRLO means giving up some of the flexibility of a regular HELOC. If interest rates drop, you won’t benefit from lower payments on the locked-in portion. Additionally, fixed-rate options may include specific terms or fees that should be carefully reviewed.

How to Decide Between a Regular HELOC and a FRLO

Your choice will depend on your financial strategy and risk tolerance:

• Regular HELOC: Best for short-term borrowing and those comfortable with variable payments.
• FRLO: Ideal for long-term financial planning and those seeking predictability and stability.

For example, if you’re funding a home renovation and anticipate needing funds at different stages, a regular HELOC might be the better choice. On the other hand, if you’re consolidating debt or covering a major expense, a FRLO can help you lock in a predictable rate and monthly payment.

Take the Next Step

Both regular HELOCs and HELOC Fixed-Rate Loan Options offer unique advantages to help you maximize your home equity. Understanding the differences and consulting a trusted financial advisor can ensure you choose the option that aligns with your goals.

Ready to explore your options? Learn more about HELOCs and how Central Pacific Bank can help you make the most of your home equity.

Note: FRLO has Principal & Interest (P&I) feature vs Regular HELOC has only an interest-only payment feature.

1. Consolidating high-interest debt into a single monthly payment may not reduce or pay off your debt sooner in all cases. If the monthly payment on your CPB HELOC is lower than the consolidated high-interest debt, it may be due to a lower interest rate on your loan, a longer loan period, or a combination of both.