Speak Straight Mortgage · Home equity

Home equity loan vs HELOC — where fixed beats floating

One draws the whole balance at a rate that never moves. The other floats with Prime and pays interest-only for years before the payment steps up. Put your own numbers in and find the Prime rate where the cheaper one changes.

The short version

A home equity loan (a fixed-rate equity line) hands you the whole balance on day one at a rate that never moves, with a draw fee financed into the balance, and amortises from month one. A HELOC floats with Prime, pays interest-only for the first several years, then steps up to a much larger payment when the draw period ends. They are different instruments, so comparing the two headline rates tells you almost nothing.

The honest answer is that it turns on one number: the average Prime rate over the years you actually keep the balance. Below that crossover the floating line wins on cost; above it the fixed line does. This calculator finds your crossover, prices the fixed side off the wholesale sheets we shop rather than asking you to guess a rate, and shows the payment step-up on the floating side instead of hiding it.

Your situation

Sets the fixed rate from the wholesale sheets we shop — you do not type a rate in.

Fixed-rate line

The base rate assumes a 4.9% draw fee. Buying the fee down costs rate — which is the trade this page exists to test.

Floating HELOC

Enter the terms of the HELOC you have actually been offered.

Fixed-rate line
Rate
Monthly payment
Financed at close
Interest + fees while you hold it
Balance at the end
Floating HELOC
Starting rate
Monthly payment
Drawn at close
Interest + fees while you hold it
Balance at the end

What you pay each month

The floating line is cheaper until interest-only ends, then the payment steps up to repay the whole balance in the years that are left. That step is the part borrowers get blindsided by.
Fixed-rate line Floating HELOC

Where they cross

Total interest and fees over the years you hold it, against the average Prime rate that actually turns up. The fixed line does not care what Prime does — that flat line is the whole point of it.
Fixed-rate line Floating HELOC
The numbers behind the chart
Avg. PrimeFloating HELOCFixed-rate line Difference

What this is and isn't. Cost means interest plus fees. Principal you repay is not a cost — it is money moved from one pocket to another, which is why the ending balance is shown separately: the fixed line amortises it down and an interest-only HELOC does not. Fixed-line rates are derived from wholesale rate sheets effective 12 May 2026 and are indicative, not a quote; your actual rate is set at draw. The Prime change field is a straight-line assumption, which is not how Prime moves — use it to test a direction, not to forecast one.

Why the two headline rates cannot be compared

A fixed-rate equity line and a HELOC are quoted the same way and behave nothing alike. Four differences do all the work:

  • When you get the money. The fixed line draws in full at closing. A HELOC is a revolving limit you draw against, so if you only ever use part of it, you only ever pay interest on that part.
  • What the payment does. The fixed line amortises from month one, so the payment is flat and the balance falls. A HELOC pays interest-only through the draw period — commonly ten years — and the balance does not move at all until the repayment period starts.
  • The step-up. When that draw period ends, the same balance has to amortise over the years remaining. The payment can roughly double overnight. Nothing about the headline rate warns you.
  • The draw fee. Fixed lines usually finance a fee, often around 4.9% of the amount drawn, into the balance. You can buy that fee down, but it costs rate — and past roughly two years the lower fee costs more, because you pay the higher rate on the whole balance for the whole term. That is the least intuitive result on this page and the easiest to verify: set the term to ten years and step the fee down one option at a time.

So which one is actually cheaper?

Whichever one wins the bet on Prime. The floating line starts cheaper almost every time, and it stays cheaper only if Prime averages below your crossover for as long as you carry the balance. Over two or three years that is often a reasonable bet. Over ten it is a forecast, and nobody has one. The fixed line is not usually the cheaper product — it is the one whose cost you know in advance, and the calculator prices what that certainty costs you rather than arguing about it.

Which is the better fit

A fixed-rate line tends to fit when you need the whole amount now for something specific — a payoff, a project with a contract price — when you will hold it for years, and when a payment that cannot move matters more than the lowest possible payment. A HELOC tends to fit when you want the line available but not drawn, when you expect to repay quickly, or when you are covering costs that arrive in stages. If you genuinely cannot say which describes you, that is worth a conversation rather than a calculator.

Rate and cost disclosure

Speak Straight Mortgage is a mortgage broker; we do not lend. Rates shown are derived from wholesale rate sheets effective 12 May 2026, are indicative rather than an offer of credit, and are subject to change without notice. Your rate depends on credit score, combined loan-to-value, lien position, occupancy, term, property type and state, and is set when the line is drawn.

On the fixed-rate lines modelled here, the first-draw fee is a percentage of the amount drawn and is selectable above at 1.9%, 2.9%, 3.9% or 4.9%; the fee is financed into the balance. Other costs to open a plan generally range from $0 to about $1,000 and may include valuation, title, recording and government charges; some programs waive them and some finance them. An annual fee may apply and is an input above.

Where the plan carries a variable rate, the rate is indexed to the Prime Rate plus a margin and can increase after opening. The maximum annual percentage rate on a variable-rate plan is 18.00%. Figures produced by this calculator are estimates for comparison only, are not an application, a commitment to lend, or a Truth in Lending disclosure, and assume every payment is made on time. Equal Housing Opportunity.

Run it against a real offer

Send us the HELOC terms you have been quoted and we will price the fixed side against them on your actual numbers, and tell you which one we would take. No credit pull to start.

See Colorado HELOC options