MarketWatch had a story recently regarding interest rate traps to watch out for in various finaciacial transactions. This is good advice on HELOC loans worth repeating:

With home equity credit lines, consider the following interest-rate pitfalls:

–Low advertised rates often are for limited periods, say six months. They also may apply to persons with certain high credit scores and/or for larger credit lines. Know what rate you’ll get after the introductory period. Be sure you have a way out if you don’t qualify for the terms you seek.

–Watch transaction fees. Although the interest rate seems low, we’re seeing transaction fees on cash advances or for conversion to a fixed-rate loan. These can add up.

–Be sure to examine strings attached to “no closing cost” offers. For example, if you fail to draw down the credit line, you may wind up owing all the closing costs. There may be steep non-usage fees if the credit line sits idle for a period. Look for termination fees as well as footnotes that give the institution discretion to change the terms from those offered in the ad under certain conditions.

Also know that the runup in interest rates means fewer borrowers and less demand for HELOCs. To some degree it is a “borrowers” market with respect to fees and costs. Don’t be shy about asking a lender to waive or lower their HELOC fees. There are plenty of lenders aggressively looking for your business.

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