A home-equity line of credit allows homeowners to draw on the value of their homes as needed, usually at a variable interest rate. A home-equity loan is taken as a lump sum, usually at a fixed rate. When interest rates rise, lines of credit and home equity loans may offer clients a less expensive way to obtain cash compared to taking out a mortgage.
If you have clients interested in a home-equity line of credit but fearful of future rising rates, find out if the lender will include a conversion feature to a fixed-rate loan. Additionally, find out total cost, including origination fees, closing costs, etc. These fees can apply to a line of credit as well as a loan.