Is a Fixed-Rate HELOC Available in Canada – and Should You Get One?

Homeowners across Canada use their home equity to fund major expenses. A Home Equity Line of Credit (HELOC) is a flexible option available for interest rates. But while most HELOCs come with variable interest rates, some borrowers are asking—Can you get a fixed-rate HELOC in Canada? And is it a smart financial move?

What Is a Fixed-Rate HELOC?

With a fixed-rate HELOC, borrowers can change their available credit limit into a loan. With a standard HELOC, the rate can vary, and as rates rise or fall, so do the monthly payments. In contrast, a fixed-rate HELOC allows you to set your rate of interest for a specific amount of time, which allows you to have a more reliable monthly payment.

A fixed-rate HELOC is much less prevalent than a variable-rate HELOC, but several lenders in Canada offer fixed-rate segments within their HELOC products. The fixed-rate segment operates much like a term loan; you take out a specified amount and, while you still have your HELOC, you have to pay back that borrowed amount on a set schedule (amortised over a few years) with often blended interest and principal.

Why Homeowners Are Considering Fixed Rates

A fixed-rate HELOC offers predictability above all else. When borrowing a larger amount of money, whether it's for home renovations, consolidating debt, or covering the costs of education, it can be helpful to know exactly what you're going to be paying. 

That predictability matters in an ever-changing market like Ontario. Homeowners keeping an eye on mortgage rates London Ontario are experiencing even more volatility. The fixed-rate option offers homeowners protection against rising costs in the form of mortgage payments that are known values, keeping their budgets intact.

How It Compares to Variable HELOCs

Variable-rate HELOCs are designed to have flexibility. However, borrowers may have the potential risk of seeing payments increase unexpectedly due to rising market rates. Fixed-rate HELOCs sacrifice flexibility for certainty; once a portion of the HELOC is locked in, those terms are guaranteed until the end of the repayment period. This works well for borrowers who just need a lump sum one time and not access to an ongoing source of credit. Some Canadians choose to have a hybrid option, converting the balance to a fixed-rate HELOC. Through this hybrid, borrowers can have a combination of control and flexibility.

Availability in the Canadian Market

Not all lenders will have fixed-rate options for a HELOC. Nevertheless, big banks and some canadian credit unions have introduced a fixed-rate conversion feature into their HELOCs. Homeowners seeking Mortgage Refinance London quality for them when renegotiating or tapping into a larger amount of equity.

Homeowners can also bundle a mortgage with a HELOC when refinancing. There are HELOC products where a part of it can be locked in at a fixed rate with some lenders. This makes it easy to repay the debt on a large expense.

When a Fixed-Rate HELOC Makes Sense

People can sell a fixed-rate HELOC if:

• You are doing a major renovation or a one-time cost.
• You want to avoid rising interest rates.
• You would like a consistent monthly payback.
• You are considering a long-term payback.

If you aren't aware of Ontario mortgage rates in London Ontario, you may want to lock a portion of your HELOC in now to ease financial stress over time, particularly if you live on a fixed budget.

What You Should Watch Out For

While the certainty is beneficial, there are drawbacks from fixed-rate HELOCs. The first drawback arises because once locked into a fixed-rate, repay quickly and there may be penalties. Also, the fixed rate is usually a little higher than the current variable rate, so if the variable rate remains low, you will miss some savings.

The key is to determine how you are going to use this borrowing. Are you going to use the HELOC as a backup plan in case of an emergency? Or, are you going to use it for planned purchases? Moreover, are your repayments stable enough to know you can afford the fixed repayments?

Having a good financial adviser will assist in these decisions and help you determine the best structure of borrowing for your situation especially amid changes in the London market.

How Refinancing Can Help

Several Canadians explore the option of a fixed-rate HELOC when refinancing. It's an opportunity to change the relationship of your mortgage with your home. So when you are considering a mortgage refinance in London, it is logical to check for fixed-rate opportunities. 

For fact, in the instance where your home has increased in value, refinancing also allows you to take advantage of that increased equity. When you use a fixed-rate portion of a HELOC as part of your refinancing strategy gives you one protected portion of your borrowing unaffected by a rising interest rate environment.

Final Thoughts

Fixed-rate HELOCs are available in Canada, although not as widespread as variable-rate lines. For those looking for consistency, especially in areas with rising borrowing costs, this option is worth exploring.

If you’re considering a HELOC or planning a Mortgage Refinance in London, ask your lender about fixed-rate options. A little predictability can go a long way when managing debt in an uncertain market.