What is the typical variable rate structure for HELOCs?​

The structure for rates on a variable rate HELOC, or Home Equity Line of Credit, is based on the current prime rate and your lender’s HELOC margin. 

HELOCs offer borrowers the chance to access a line of credit based on their home equity. With a variable rate HELOC, the interest that borrowers pay over the life of their loan is subject to change alongside current HELOC rates. 

If a variable rate HELOC sounds like the right choice for you, you can start with an online application. 

What does it mean to have a HELOC with a variable interest rate?

Having a HELOC with a variable interest rate means that your loan payments will not stay consistent during the life of your loan. The interest you pay will change alongside current HELOC rates. Meaning that some of your loan payments could be higher, while others could be lower. Making planning for your future HELOC payments trickier. 

How does a variable interest rate for a HELOC work?

When you get a variable interest rate on a HELOC, you tend to start with a lower initial interest rate. This lower interest rate will be fixed for a certain period, as you get used to your new loan, before your interest rate starts to change. Interest rates on a variable rate HELOC will change along with the prime rate. 

What is a prime rate?

The prime rate is the base interest rate that lenders use when determining the interest rate you will get on your HELOC, or any other loan. On a variable rate HELOC, the changes in your interest rate will be tied to the prime rate. Prime rates are not the rate you will get on your loan, but the benchmark that lenders use. On top of the prime rate, lenders will add a margin. 

What is a HELOC margin?

A HELOC margin is the set percentage that a lender adds on top of the prime rate. The prime rate plus a lender’s margin is the rate that you will see on your HELOC. Your margin does not change over the life of your loan. 

Are the draw period and repayment period different for a variable rate HELOC

Yes, your draw period and repayment period are different for a variable rate HELOC, though this has less to do with your variable rate and more to do with how a HELOC works. 

During the draw period you will only be paying interest on the amount you borrow. While during your repayment period you will be required to pay both the amount you borrowed and interest on that amount. Having a variable rate means that the interest you pay during the draw and repayment periods of your loan can change. 

How often do rates change with a variable rate HELOC?

The frequency that the rate on your variable rate HELOC changes will depend on the lender you get your loan with. With some lenders the rate you pay on a variable rate HELOC will change monthly, with others it can change only twice a year. When finalizing your variable rate HELOC, you will be informed of how often your rate changes. However, it is a smart idea to speak to your lender early on about how frequently you can expect your rate to change, allowing you to stay informed and make decisions accordingly. 

How can I apply for a variable rate HELOC?

You can apply for a variable rate HELOC with an online application through a trusted lender, like Rate. 

Online variable rate HELOC applications with Rate can be completed in as little as five minutes. After an online variable rate HELOC applications from Rate, you will get access to your line of credit in as soon as five to ten days, when approved. 

For a variable rate HELOC with a trusted lender start your application online today. 

_{Applicant subject to credit and underwriting approval. Restrictions apply.} 

_{Information provided is for educational purposes only. It should not be construed as financial or legal advice or instruction. Rate does not guarantee or assume liability for the accuracy, completeness or timelines of the information. You should conduct additional research before making any mortgage related decisions.} 

_{The variable rate home equity line of credit (HELOC) is an open-end product where the borrower can withdraw funds and make interest only payments during the draw period. Monthly payments will increase to include both principle and interest payments after the draw period has ended. A minimum 90% of the total approved HELOC amount must be disbursed. The remaining 10% of the approved credit line can be drawn down later as needed during the draw period. The monthly variable interest rate is based on an Index, which is the Prime Rate published in the Wall Street Journal plus a fixed margin. This product is currently only available in Arizona, California, Illinois, Massachusetts, and New Jersey. The HELOC requires you to pledge your home as collateral, and you could lose your home if you fail to repay. Property insurance is required as a condition of the loan and flood insurance may be required if your property is located in a flood zone. Borrowers must meet minimum lender requirements in order to be eligible for financing. Available for primary, second homes and investment properties only. Property type, loan-to-value, and FICO restrictions and requirements apply. Dependent on minimum credit score and debt-to-income requirements. Occupancy status, lien position and credit score are all factors to determine your rate and max available loan amount. Not all applicants will be approved. Applicants subject to credit and underwriting approval. Contact Rate for more information and to discuss your individual circumstances. Restrictions Apply.}