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I have 2/3 equity in my home, and could borrow against another third.

Actually, many lenders only allow HELOCs up to 80% - 90% LTV, not 100% LTV. If you are going to take the initial draw at closing to use for home improvements, they may may (or may not) allow the value of the home on the expected value after the improvements are completed, but you generally have to have a contractor's bid to show the improvements that will be done, and that the cost, plus other liquid funds you have will be at least as much as the bid plus a an overrun factor.

a fixed HELOC at 5% (5yr draw period, 5yr repayment period)

Will the draws for the fixed HELOC be amortized over the remainder of the draw period plus the 5 years repayment period, no matter how many draws you take? Or will each draw be amortized over the 5 year repayment period, so you could end up with several different sub-loans, each amortized over 60 months, if you take multiple draws during the draw period? That's important to understand, especially if you are looking at using this for something like living expenses during unemployment.

adjustable HELOC starting at a minimum 4% and tied to prime

Tied to prime as in 'equal to the prime rate' or as in 'equal to the prime rate minus 0.5%', 'equal to the prime rate plus 0.5%' or something similar?

closing casts are locked at $630

Closing costs for a HELOC? You might want to shop around....

For the Adjustable, Prime will have to rise above 4% before the adjustable moves at all. But if it does start moving, I expect it would move past the 5% of the fixed rate before too long.

Do you have the option of moving the adjustable amount to a fixed rate later? If so, I'd probably go for the adjustable.

If not, since Prime is 3.25%, it would only take four 0.25% steps or two 0.5% steps for the adjustable to increase above the fixed. So it's a gamble of which one you think will allow you to pay less in interest overall. That will depend on how long you think it will take you to pay off the money you will take out, which will require you to make guesses on how long you think the prime rate will stay at the current rate and how much you think you are going to borrow. So, despite the fact that you don't want to try to guess, you should probably run a few different scenarios that you think are likely to see which one will result in paying less interest.

and the repayment period is 2 years shorter as well.

Keep in mind that the repayment period is the maximum time period after the draw period ends that the lender will allow for you to pay the loan off. Nothing keeps you from paying the loan off during the draw period by making bigger payments than the minimum required.

So in reality, the fixed HELOC loan only has a 10 year total length, while the adjustable has a 17 year total length. So, if you are wanting to keep your HELOC options open as long as possible, that would make the adjustable loan the more attractive option.

AJ
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