5 Ways to Refinance a HELOC

Refinancing a HELOC can help you lower payments, lock in a fixed rate, or access more funds. Five common strategies include switching to a new HELOC, converting to a home equity loan, consolidating with a cash-out refinance, using a personal loan, or modifying your current HELOC. 

Each option has pros and cons, and this guide will help you choose the best fit for your needs.

How to refinance a HELOC: 5 options

Homeowners can choose from five popular HELOC refinancing options. These are the choices to consider.

1. Refinance into a new HELOC

If a HELOC worked well the first time, you may want to refinance to another one. You can take out a new HELOC that you use to pay off the entire balance of your existing HELOC. 

This type of refinance gives you a fresh HELOC with a lengthy draw period. You have the flexibility of making lower monthly payments than an installment loan. However, debt can accumulate if you only pay the interest.

Pros

• Lower monthly payments

• You get an extended draw period

• You might qualify for a higher HELOC limit since your property has likely gained value

Cons

• Variable interest rate

• Additional loan origination fees and other costs

• You will stay in debt longer

Here are some top-rated HELOC lenders to consider refinancing your HELOC with:

2. Convert to a home equity loan

A home equity loan has fixed monthly payments and a term that ranges from five to 30 years. It differs slightly from a HELOC due to its higher monthly payments. However, home equity loans help you pay off the principal faster.

Another distinction with home equity loans is their fixed interest rates. You don’t have to worry about what the Fed or your lender does with interest rates moving forward. However, HELOC borrowers must monitor their variable rates to see if their monthly payments will change.

Home equity loans and HELOCs both tap into your property’s equity. It’s possible that your home equity loan’s amount will exceed your current HELOC’s limit since your property has likely appreciated. 

Pros

• Fixed monthly payments offer more stability and help you know what to expect

• You can potentially borrow more for a home equity loan than your current HELOC limit

• Terms vary from five to 30 years, offering plenty of flexibility

Cons

• Fixed monthly payments don’t offer much flexibility if you have a sudden change in income

• High closing costs and other fees

• You will likely stay in debt longer

Here are some recommended lenders for a home equity loan:

Company	Rates (APR)	Loan amounts
Spring EQ	Not specified on the site	$25,000 – $500,000
Navy Federal Credit Union	7.34% – 18.00%	$10,000 – $500,000
Discover	7.93% – 12.32%	$35,000 – $300,000
Unison	Not specified on the site	$30,000 – $400,000

3. Consolidate with a cash-out refinance

A cash-out refinance gives you extra cash that you can use for any purpose. This route involves taking out a loan or a line of credit higher than your HELOC’s remaining balance. You can then use the extra funds for home improvements, a vacation, or any other purpose.

For instance, if you have a $50,000 balance on your HELOC and use a $75,000 HELOC as your cash-out refinance, you have an additional $25,000. You can refinance your existing HELOC as a new HELOC or a home equity loan.

Pros

• Access additional funds

• You can extend the loan’s duration to minimize monthly payments

• Lower interest rates than unsecured loans

Cons

• You will end up with higher monthly payments unless the loan term is longer

• You will stay in debt for longer

• You won’t have as much equity in your home

4. Use a personal loan

You can use a personal loan for any purpose. It’s not usually the first option for refinancing a HELOC. However, personal loans have quicker approval processes than home equity loans and HELOCs. You don’t have to go through an appraisal or extra steps.

Many lenders will let you take out up to $50,000 with a personal loan. However, some let you go as high as $200,000 for a personal loan. However, interest rates on personal loans tend to be higher than on home equity loans and HELOCs.

It’s also important to note that many personal loan providers only let you select two-to-seven-year terms. Some lenders offer personal loans with more than 10-year terms. Unfortunately, it’s very difficult to find ones with the same flexibility as home equity loans and HELOCs.

Pros

• Easier application process

• Receive funds earlier

• Some lenders do not require good credit scores

Cons

• Higher interest rates than loans that use your home as collateral

• Shorter loan terms

• In most cases, lower loan amounts than HELOCs and home equity loans

Here are some top-rated personal loan recommendations:

5. Modify your current HELOC

Some lenders will let you modify your current HELOC. This approach can preserve your relationship with your current lender. However, you must still pay closing costs and other applicable fees.

A HELOC modification can help homeowners reduce their principal, extend the repayment term, reduce the interest rate, or convert to a fixed-rate HELOC. Lenders will review your explanation for the modified HELOC and make a decision.

Pros

• Adjust the terms of your HELOC to make monthly payments more manageable

• You can work with the same lender

• You have an established history with this lender, which can help you get a modified HELOC

Cons

• Lenders are not obligated to modify your HELOC

• You still pay extra closing costs and other applicable fees

• Another lender may have a better deal

Can I refinance my HELOC with another bank?

You can get a HELOC with another bank, and change can be a good thing. A new bank may offer a more competitive APR and generous draw period. 

Homeowners can also benefit from switching banks if they want to continue borrowing capital after the draw period concludes. Furthermore, a refinance can make monthly payments more manageable. 

It’s good to still check in with your bank about a refinance. Your bank may offer the best rate and term. However, you may find a better deal if you explore your options.

Is now a good time to refinance my HELOC?

Refinancing a HELOC could be a good move if your financial situation warrants it. However, homeowners with more financial flexibility should also consider market conditions before deciding.

The Federal Reserve has been lowering interest rates, with the Federal Funds Rate ranging from 4.75% to 5.00%. The Fed is likely to reduce rates more, and that would be favorable for HELOC borrowers.

The National Association of Home Builders projects that mortgage rates will drop below 6% in the second quarter of 2025. The organization also believes that rates will continue to drop in 2026.

Most HELOCs have variable interest rates, so any rate cuts will make your HELOC more affordable. Homeowners looking for fixed-rate loans may want to wait for the Fed to lower rates a bit more, as that outcome seems likely.

When is it a good idea to refinance my HELOC?

Refinancing a HELOC can make plenty of sense under the right scenario. These are some of the ways homeowners can benefit from a HELOC refinance.

Interest rate reduction

Some homeowners can get lower rates if they refinance their HELOCs. While the Fed’s rate cuts can result in lower rates, you can also get a more favorable APR if you have improved your credit score.

If you received your current HELOC when you had fair credit, and you have excellent credit now, it may be worth getting a refinance. 

To transition to fixed rates

Transitioning to a fixed-rate HELOC or home equity loan can be a good move if rates continue to drop. Homeowners who are nervous about interest rates rising may want to secure a good rate now.

While rates aren’t likely to spring higher anytime soon, it’s good to keep this option in mind. It’s easier to predict how rates will change within the next 1-2 years than within the next 5-10 years.

Draw period expiration

Refinancing a HELOC will give you a new draw period. That way, you can access your home equity if needed instead of only making monthly payments. 

Access additional funds

Homeowners can use HELOC funds for any purpose, such as home improvements for a vacation. A cash-out refinance lets you tap into additional equity that you can use for any expense.

If the current interest rates are at least 1% lower than your HELOC rate, it might be a good time to refinance. This could help reduce your monthly payment and total interest, and potentially give you access to additional funds if the value of your home has increased. 

When making the decision to refinance, consider the likelihood of future interest rate cuts and if waiting could pay off. Also, consider the costs associated with refinancing and how long it will take to recoup those costs.

Chloe Moore, CFP®