Washington Trust's New HELOC: A Strategic Move or a Costly Gamble?

Washington Trust has launched a new Home Equity Line of Credit (HELOC) offering designed to attract homeowners in Connecticut, Massachusetts, New Hampshire, and Rhode Island. The promotional product features an introductory fixed APR of 5.99% for 18 months, paired with flexible repayment terms and variable-rate structures post-promotion. But is this a smart investment opportunity, or does it come with hidden risks? Let’s break it down.

Key Terms and Features

The HELOC’s introductory APR of 5.99% is available for new lines of credit up to $400,000, requiring borrowers to maintain a Washington Trust checking account and enroll in Autopay. After 18 months, the APR becomes variable, tied to the Wall Street Journal Prime Rate (currently 7.50%) minus 0.125% to plus 0.25%. This means the post-promotion rate could initially range from 7.375% to .75%, with a ceiling of 18.00% and a floor of 2.75%.

The product also includes:
- Flexibility: Borrowers can draw funds incrementally and repay/reborrow during the line’s term.
- Purpose: Suitable for home improvements, debt consolidation, or other expenses.
- Geographic Focus: Limited to owner-occupied primary residences or second homes in the four Northeast states.

Who Benefits?

The offer is most advantageous for:
1. High-Equity Homeowners: With a minimum 80% Loan-to-Value (LTV) requirement, this targets borrowers with significant equity.
2. Short-Term Borrowers: Those planning to pay down the line within the 18-month fixed-rate window avoid exposure to variable rates.
3. Washington Trust Customers: Existing account holders gain access to the introductory rate, incentivizing deeper banking relationships.

Costs and Caveats

While the low introductory rate is enticing, several factors could erode savings:

Fees to Watch

• Account Closure Fee: $350 if closed within 36 months (rises to $500 for loans exceeding $500,000).
• Annual Fee: $50 begins after the 13th billing cycle.
• Recording Fees: Vary by state ($88 in Rhode Island; up to $217 in Connecticut).

Variable Rate Risks

The post-promotion APR is tied to the Prime Rate, which has risen steadily since 2020. A shows the bank’s financial health, but rising rates could push borrowing costs higher. For instance, if the Prime Rate climbs to 8.50%, the APR could hit 8.375%, negating some savings from the initial promotion.

Eligibility Hurdles

• Property Type: Trusts or LLCs are excluded, limiting options for investment properties.
• Minimum Draw: A $10,000 initial third-party disbursement is required at closing, complicating cash-strapped scenarios.

Comparison to the Market

The national average HELOC rate was 9.18% in July 2024 (Bankrate), making Washington Trust’s introductory rate a standout. However, post-promotion rates may align with or exceed competitor offerings if Prime continues rising. For example, Truist Financial (TFC) and Comerica (CMA) often offer HELOCs in the 7%–9% range, depending on creditworthiness.

Investment Considerations

For investors in Washington Trust (WATG), the HELOC could boost short-term earnings through increased loan volume. However, rising defaults in a weaker economy could strain margins. The bank’s stock price has dipped slightly over the past year due to macroeconomic uncertainty, but its dividend yield of 1.5% (as of Q2 2025) remains stable.

Conclusion

Washington Trust’s HELOC is a competitive offering for qualified borrowers in its target states, especially those needing short-term liquidity. The 5.99% introductory rate beats most market averages, but long-term costs hinge on Prime Rate movements and fee management.

Final Verdict:
- Go for it if: You’re a Washington Trust customer with high equity, a clear repayment plan within 18 months, and no immediate plans to sell the home.
- Proceed with caution if: You’re relying on the variable-rate phase or expect economic instability.

The promotion’s “limited time” tag underscores urgency, but borrowers must weigh the potential savings against the risks. As the saying goes: “A home equity line is a tool, not a cure-all.” Use it wisely.

For the full terms, visit
Washington Trust’s HELOC page. Always consult a financial advisor before committing.