Bank of America HELOC review: Multiple rate discounts available

A mother and daughter make smoothies in the family's new kitchen which was remodeled using a Bank of America HELOC.Image: A mother and daughter make smoothies in the family's new kitchen which was remodeled using a Bank of America HELOC.
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Bank of America HELOC at a glance

  • Fixed or variable rate: Variable but may convert to fixed
  • How to withdraw funds: Checks, Visa Access card, in-person or phone withdrawals, online and mobile banking
  • Origination fee: No
  • Loan-to-value ratio: Unclear
  • Time to fund: Unclear

Bank of America is a large, well-known bank that offers home equity lines of credit (HELOCs) with access to up to $1 million of your home equity. Borrowers may be able to save with rate discounts and the option to convert to a fixed-rate loan option.

Pros

  • Ability to convert to a fixed-rate loan
  • No application fee, closing costs or annual fee
  • Access up to $1 million in home equity

Cons

  • Minimum of $25,000 HELOC is required to complete your application online
  • Must have excellent credit and qualify for discounts to get the best rates
  • Other lenders may offer lower rates

4 things to know about a Bank of America HELOC

Here are a few of the key features of the Bank of America HELOC.

1. Rate discounts are available

Bank of America offers several opportunities for borrowers to reduce their interest rates, which can help you save money on interest payments over the lifetime of your loan.

This includes an 0.25% discount for setting up automatic monthly payments and a maximum 1.5% discount when you make an initial withdrawal after opening your account (0.1% reduction on your interest rate for each $10,000 you withdraw).

Bank of America Preferred Reward Members can also get additional discounts. Gold tier receives a 0.125% interest rate discount, Platinum tier receives a 0.25% discount, and Platinum Honors tier receives a discount of 0.375%.

Tiers are determined based on the combined qualifying balances of your Bank of America deposit and Merrill investment accounts. To qualify as a Bank of America Preferred Rewards Member, you’ll need to have an active checking account and a three-month combined daily balance of $20,000 or more.

2. Ability to convert to a fixed loan

While most HELOCs have a variable interest rate, the Bank of America HELOC offers the opportunity to convert all or a part of your HELOC to a fixed-rate loan. This can be a benefit since having fixed payments can make budgeting more predictable. Once you’ve locked in your rate, it won’t change for the duration of the selected term.

This can offer protection against rising interest rates. But it’s important to note that Bank of America says the fixed rates for these loans are typically higher than the variable rates. This means you’ll pay more interest up front, but if rates rise, you could ultimately save money on your interest payments.

There’s no fee for converting your loan, and you can have up to three fixed-rate loans at once. This gives you the flexibility to lock in rates over time. Note, however, that you must convert at least $5,000 each time, for a total of no more than 90% of your maximum credit line amount.             

3. Approval requirements are not disclosed

Some lenders provide approval requirements up front, making it easy to understand whether you’re likely to qualify. Bank of America does not disclose this information on its website.

Instead, you’ll need to submit an application and documentation before you find out whether you’re approved. However, you can apply with no fee or obligation. A Bank of America loan specialist may also be able to provide you with the approval requirements over the phone before you complete the entire application process.

4. You cannot complete your HELOC closing online

Although you can complete the application online, you’ll need to communicate with one of Bank of America’s loan specialists to finish the process. Once approved, you’ll also need to close your HELOC in person at one of Bank of America’s financial centers.

If you’re applying for a HELOC of less than $25,000, you’ll need to contact Bank of America over the phone to get started — starting your application online is not an option.

These requirements could be inconvenient for those who prefer a fully online experience.

Is getting a HELOC a good idea?

There are many potential advantages to getting a home equity line of credit. Since they may allow you to make withdrawals using a check, online transfer or even a Visa card, a HELOC can be a convenient way to access the equity in your home.

Unlike a cash-out refinance or a home equity loan, a HELOC allows you to withdraw only what you need when you need it, rather than having to pay interest on a lump-sum loan. You can also use your HELOC for anything you need including home repairs, education expenses or paying off higher-rate debts.

But there are some potential drawbacks to consider. For example, HELOCs typically have a variable interest rate and variable payments. As mentioned, Bank of America’s HELOC allows for conversion to a fixed rate, with certain conditions — but a typical variable rate HELOC can make budgeting difficult. HELOCs also use your home as collateral, which means you could risk losing your home if you don’t make your payments.

Who is a Bank of America HELOC good for?

With the potential to access up to $1 million, the Bank of America HELOC could be good for homeowners who have a significant amount of home equity and want to access a big line of credit. Bank of America Preferred Reward Members will also receive lower interest rates than the general public, possibly making this a good choice for current Bank of America customers who qualify for these perks.

How to apply for a Bank of America HELOC

For HELOC amounts of $25,000 or more, Bank of America offers an online application that you can complete. But for smaller HELOCs, you’ll need to call the bank’s service center to get started. 

  • Minimum eligibility requirements are not provided online. You can try contacting Bank of America’s service specialists for more information.
  • You can start your application online by providing basic information. From there, you’ll upload the required documents and can check your status online. A Bank of America rep will guide you through the process. If you’re approved, you’ll need to close your HELOC in person at a Bank of America branch.
  • Gather your income and employment documentation and information about your current mortgage balance and payments. You’ll also need to provide your current homeowners insurance and property tax amounts, along with your estimated property value. The online application also asks for the HELOC amount you’re requesting and how you plan to use the funds.

Not sure if Bank of America is right for you? Consider these alternatives.

  • Figure: Along with competitive starting APRs, this newer lender uses blockchain technology to offer a fast, 100% online application and approval process and funding potentially within five days. 
  • Third Federal: This bank’s “Fixer Upper Home Repair Loan,” which offers a competitive fixed rate and no closing costs, could be an option for people who only need to borrow a smaller amount.

About the author: Beth Deyo is a personal finance freelance writer with a bachelor's degree in Finance from the University of South Florida. She is also a Certified Financial Planner™ with 14 years of wealth management experience. She … Read more.