Can you pay off a HELOC early?

Yes. Paying down the balance is almost always free. Closing the account early is where fees hide.

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Paying it down faster

• Pay principal during the draw period, not just interest.
• Pay early in the billing cycle to cut the average daily balance.
• Put windfalls like bonuses and tax refunds toward the line.

Should you close a HELOC after paying it off?

Not always. A paid-off HELOC with a zero balance usually costs nothing to keep open (check for an annual fee) and can serve as a backstop. Close it if you're selling, refinancing, or the open line tempts you to spend.

How much faster pays off

On an $80,000 line at 7.75% APR, paying an extra $200 a month for the 10-year draw period cuts the balance to $56,000, and the repayment payment to about $460 instead of $657. Try your own balance.

What extra payments do

On a $50,000 balance at 7.75% APR:

Keep it open or close it?

• Keep it open if there's no annual fee and you want a backstop for large emergencies.
• Close it if you're selling or refinancing (it will be paid off and closed anyway), if there's an annual fee you don't want, or if having it available is a temptation.
• Lower the limit as a middle ground.

When you close a paid-off line, ask the lender to record a lien release (reconveyance) with the county, and check a few weeks later that it was recorded.

Early-closure fees

If the lender paid your closing costs, closing the line in the first two or three years often triggers a fee, commonly a few hundred dollars or the closing costs they covered. Paying the balance to zero without closing the line usually avoids it.

Strategies that speed up payoff

• Biweekly payments. Paying half your monthly amount every two weeks makes 26 half-payments a year, an extra full payment annually.
• Round up. If your payment is $612, pay $700. The $88 goes entirely to principal.
• Windfalls. Put tax refunds and bonuses toward the line the week they arrive.
• Lock and amortize. Converting the balance to a fixed-rate lock with a 5- or 10-year term forces a payoff schedule.
• Stop drawing. Every new draw resets the finish line.

Example

A homeowner with $40,000 at 7.75% APR pays interest only ($258) for two years, then switches to $800 a month and adds a $5,000 bonus each year. She's debt-free a little over three years after the switch.

Also asked

Is there a prepayment penalty on a HELOC?

Rarely. Paying down a HELOC balance is almost always free. The charge, if any, is an early-closure fee for closing the line within the first few years, commonly a few hundred dollars or the closing costs the lender covered.

Should I pay off my HELOC before my mortgage?

Usually yes. A HELOC typically has a higher rate than a first mortgage and a variable payment, so it's usually the better debt to pay down first.

Does paying off a HELOC raise my credit score?

Often, yes. Paying off a HELOC tends to help your credit score, especially if your scoring model counts the HELOC as revolving credit, because lower balances generally help.

Will paying the balance to zero close my line?

No. Paying a HELOC balance to zero doesn't close the line. The line stays open until you or the lender close it, and you can draw again during the draw period.

More in HELOC guides

• Credit score for a HELOC
• HELOC closing costs and fees
• How long a HELOC takes
• Does a HELOC require an appraisal?
• Is HELOC interest tax deductible?
• Fixed-rate HELOC options
• How to refinance a HELOC
• What's the smallest and largest HELOC you can get?

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