Prime+x%?

Q: Can the rate of home equity line of credit fixed? Or is it always Prime+x%? I've never seen one fixed. Someone might do it, but I'd say it's uncommon. Do I have any obligation including payment or anything if I don't tap into the fund? There may be closing costs for the loan, depending on the creditor. Some creditors may require a minimum initial draw as well. So it depends on the lendor. Is bank okay with it if I just sit on this line of credit and possibly never use it? Is there a time limit for the line of credit? Depends... This would be a good question to ask as you're comparing loans. What is the best way to obtain this? Through my mortgage agent or just regular backs will do? Shop around for the best rate and terms. Anything about the line of credit that I don't know could come back and bite me on this?

A: I'm not sure if this is the best way to do it. If you don't need the money now, don't get a loan. I'd say there are two options I would pick. First, you could invest your cash right now and then use a home equity loan for the remodel. If you could get a low rate on the loan, and a good rate of return on the investment, you'd come out ahead in the long run. If you don't want to do this, as it contains a certain amount of risk and returns on investments aren't the best right now, then I'd just use the cash to remodel and then you can always open up a HELOC later on should you need emergency funds. I wouldn't do the HELOC right now just to have emergency cash though, there will most likely be some cost associated with it and you don't know that you will need it.

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