How to refinance a HELOC

If the draw period is ending or the rate has climbed, you have four ways out.

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The options

Start 6–12 months before your draw period ends, while your income and credit are where you want them. What happens if you wait.

Example: $80,000 balance at the end of the draw period

Interest-only at 7.75% APR is about $517 a month. If you do nothing, a 20-year repayment raises that to about $657. A 15-year fixed home equity loan would run higher per month but end five years sooner. A new HELOC resets the draw period, but only delays repayment. The full jump table.

Qualifying again

Any refinance is a new application: income, credit and value are checked again. If your situation has changed for the worse, start early or talk to your current lender about a modification.

Comparing the options

When to start

Begin six to twelve months before the draw period ends, while your credit and income are steady. Waiting until the higher payment starts means applying under pressure, and a missed payment would make qualifying harder.

Refinancing with the same lender

Ask your current lender first. Some offer to extend the draw period or convert the balance to a fixed term with less paperwork than a new loan. Compare that offer with at least one outside quote.

Example

An owner has $80,000 left on a HELOC whose draw period ends in eight months. Repayment would raise the payment from $517 to $657. He refinances into a new HELOC with a fixed-rate lock on the balance for 15 years at about $775 a month, but now with a set end date.

Checklist

• Current balance and draw-end date.
• Quotes for a new HELOC and a home equity loan.
• Early-closure terms.

Also asked

Will refinancing a HELOC hurt my credit?

Usually only a little. Refinancing a HELOC means a new application, which brings a credit inquiry and a new account, but the effect on your credit is usually small and temporary.

Can I refinance a HELOC into a fixed rate?

Yes, with a home equity loan, or by locking the balance if your lender offers fixed-rate locks.

Can you refinance a HELOC if your home value dropped?

Possibly, but refinancing a HELOC gets harder when your home value drops, because lenders cap combined debt at a percentage of value. Any refinance is a new application, so the lender checks value again.

Can I refinance a HELOC if my credit has dropped?

Possibly, but it's harder. A new lender will price on your current score, possibly at a higher margin, and may decline. Your current lender may offer a modification or an extension of the draw or repayment period without a full new application.

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
• Can you pay off a HELOC early?
• What's the smallest and largest HELOC you can get?

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