What to Do When Your Lender Offers You a HELOC Promotion

Your lender sends you an offer: open a HELOC in the next 30 days and get a 0.99% introductory rate for six months, waived closing costs, and no annual fee for the first year.

Is this a good deal? Maybe. But the introductory rate is almost never the number that determines whether a HELOC promotion is worth taking. Here’s how to evaluate these offers properly.

The Intro Rate Is a Teaser — Focus on the Margin

When a lender offers 0.99% for six months, that’s the introductory period rate. After six months, you revert to the standard variable rate — which is Prime + your margin.

This is the number that actually matters. Ask specifically:

• What is the post-intro rate? (Prime + ?)
• What is Prime today?
• What will my fully-indexed rate be when the intro period ends?

If the intro is 0.99% for six months but the post-intro rate is Prime + 1.5% — and Prime is 8.25% — you’re going to 9.75% in six months. On a $100,000 balance, that’s $812/month in interest. The intro period saved you some money, but the long-term cost of a high margin can far outweigh those early savings.

Compare that to an offer with no intro rate but a margin of Prime + 0.25% = 8.50%, or $708/month ongoing. The less flashy offer is cheaper in the long run.

The Fee Waivers: Real Savings or Offset Elsewhere?

Waived closing costs on HELOCs can be a genuine benefit — these typically run $200-$1,500 depending on whether an appraisal is required. But watch for:

Early closure fees. Many HELOCs that waive closing costs recapture them if you close the line within two or three years. If you close in year one, you might owe back $500-$1,000. Read this provision carefully.

Annual fees after year one. A ‘first year free’ annual fee promotion means you’ll pay it starting year two. Typical HELOC annual fees run $50-$100, which is modest — but factor it in.

Draw requirements. Some promotional HELOCs require you to draw a minimum amount (sometimes $25,000 or more) at closing or within a set period. If you wanted a HELOC as a standby credit line without actually drawing, a mandatory draw defeats the purpose and starts your interest clock immediately.

Rate Floors and Caps: The Limits That Matter

Every variable-rate HELOC has two limiting terms buried in the agreement:

Rate floor: The lowest rate it can ever go, regardless of how far Prime falls. A 2% floor means even if Prime drops to 1%, your rate stays at 2%.

Rate cap (lifetime cap): The highest rate it can ever reach. A ‘lifetime cap of 18%’ sounds alarming but is standard — federal law requires it. More meaningful is whether your agreement has periodic caps (how much it can rise per adjustment period), which some lenders offer and others don’t.

In a declining rate environment, the floor limits your benefit. Ask about both when evaluating any offer.

When Promo Offers Are Worth Taking

A promotional HELOC is genuinely attractive when:

• The post-intro margin is at or below Prime + 0.50% — competitive by any standard
• There are no draw requirements or early closure clawbacks
• You were going to open a HELOC anyway and the promotion accelerates timing you’d chosen independently
• The fee waivers represent real savings you’d otherwise pay with a competitor offering similar terms

When to Pass

• The post-intro margin is higher than competing offers without promotions
• You’d only open the line because of the teaser rate
• Draw requirements would force you to borrow money you don’t need
• The early closure fee makes it costly to switch if you find better terms later

The Comparison to Always Make

Before accepting any HELOC offer — promotional or not — get at least two competing quotes. Call your credit union. Check an online lender. Ask for the post-intro margin, the floor, any fees, and the early closure terms from each.

The best HELOC isn’t the one with the best promotional headline. It’s the one with the lowest long-term cost and terms that match how you’ll actually use the line.