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Home Equity HELOCs

How to Refinance a HELOC

A HELOC is a flexible lending tool that allows you to borrow money when you need it. It uses the home as collateral on the loan, which is a very safe way for lenders to lend money to you. Because of this security, you generally get a much lower interest rate on a HELOC than a personal loan or credit card.

It’s an incredibly useful and low-cost financing tool, but there may come a time when you need to refinance it. Whether you need a lower interest rate, more funds, or a lower payment, there are many reasons why you may want to refinance a HELOC. 

Our guide breaks down how and when you might want to do it.

Can you refinance a HELOC?

Refinancing a HELOC involves paying off your existing HELOC with a new loan, typically a new HELOC, with new rates and terms.

You can refinance a HELOC if the conditions are right. A lender can help determine that for you.

These may include:

  • If there’s enough equity in your home
  • If your credit is in great shape 
  • If you have an appropriate level of income and debt to manage the payments on the new HELOC

Refinancing could be beneficial for your finances. It can help you extend your draw period, lower your interest rate, reduce your monthly payment, or help you fund new expenses. Refinancing a HELOC is a low-cost financial tool that could work for your situation, but make sure it’s right for you. 

The following are scenarios in which considering HELOC refinancing may be a good idea.

You don’t think you’ll be able to keep up with payments

If your draw period ends and your repayment period gives you a payment you can’t handle, you might want to refinance a HELOC to restart (or lengthen) the draw period. Restarting the draw period changes your payment back to interest-only payments, which are lower than repayment amounts.  

Keep in mind, though: spreading your payments out over a longer period of time or only making interest payments will mean paying more over the life of the loan. This step should only be taken if your payments will be unmanageable.

Market conditions have changed

Changing economic and market conditions might make you think about refinancing a HELOC. When interest rates go down, refinancing a HELOC could give you a better rate. Likewise, if the variable rate on your HELOC increases significantly, you might consider refinancing your HELOC to a different loan product, like a home equity loan.

Refinancing to a home equity loan gives you a fixed interest rate and fixed monthly payment. This can be helpful to create a plan to pay off the HELOC, rather than just making the interest-only payments.

Natalie Slagle


One thing to understand about this is most HELOCs are variable rates and will adjust with market conditions. This doesn’t mean you’ll get the lowest rates, though, because there’s usually a floor rate in your contract that spells out the lowest interest rate you can get even if market rates are lower. 

Refinancing a HELOC may be able to change the floor rate on a HELOC.

You have new expenses you need to fund

If your current HELOC’s draw period is coming to a close and you have new debts or expenses you need to cover, refinancing can also be helpful. You’d simply refinance into a larger loan amount or credit line, allowing you to pay off your existing HELOC and still access cash for additional expenses.

Be careful about stacking debts, though. Not only can it mean paying more in interest over the long run, but it can also make your payments unmanageable once your repayment period starts.

You think you can qualify for better rates

If your income has increased, you’ve reduced your debts, your credit score has improved since taking out your initial HELOC, or you find a great promotion on a new HELOC with another bank, then there’s a chance you could qualify for better interest rates than the one you currently hold.

To take advantage of these potentially better rates, you’d need to refinance your HELOC into a new loan or line of credit. Start by getting a prequalified quote with your lender of choice, and then compare those to at least two or three other lenders.

Ask the expert

Natalie Slagle


Remember to shop around for the best HELOC product. You do not need to stick with the same institution that carries your mortgage. Really evaluate the reason you are refinancing your HELOC. Is it to better your overall financial situation? Or will it leave you in a worse position in the long run? Make sure the monthly payments are affordable and that you have a plan to start paying down the principal within a reasonable amount of time.

Pros and cons of refinancing your HELOC

Whether or not you should refinance your HELOC depends on what you need from the loan. To consider it from all angles, examine the pros and cons.


  • HELOCs usually come with some of the lowest interest rates available for financing large purchases

  • Restarting the draw period can lower your monthly payment

  • You may be able to qualify for a lower interest rate

  • You might find a lender you like better or that offers better rates

  • You may have access to more funds if your home equity has increased


  • You may pay more in interest by restarting the draw period and making interest-only payments

  • Access to more funds could put you further into debt

  • Your credit score could take a hit (but it’s usually temporary and often small)

With all things considered, sometimes refinancing a HELOC is a necessity, and you’ll need to do it if you can qualify with a lender. 

How to refinance a HELOC

The process of refinancing a HELOC begins by deciding what you’re going to replace the HELOC with. A new HELOC can be smart if you know you’ll have ongoing costs to cover in the future, but you also might be able to get what you need out of your current lender.

Start with your existing lender. 

Lenders may be able to modify your loan, especially if you’re experiencing hardship. The lender may be able to adjust your rate, loan term, or payment schedule without needing to refinance or re-apply for a new loan.

If your lender is unable to modify your HELOC, follow these steps below to refinance your HELOC:

1. Research HELOC lenders

It’s a good idea to see your options for refinancing a HELOC—and don’t forget—HELOC lenders differ from mortgage lenders. You’ll see most of your HELOC options from the following sources:

  • Banks. Many borrowers like the in-person experience of working with a banker on a HELOC refinance, which is what traditional banks offer. Banks may offer higher APRs than other lenders, so be sure to compare quotes from multiple lenders.  
  • Credit unions. Credit unions offer very competitive APRs on loan products, including HELOCs. There are even online credit unions where you can apply for a HELOC
  • Online lenders. Online lenders can be very easy to work with. You apply online and receive a decision very quickly. You may be presented with different loan options and what interest rate and term you qualify for. Often, they can check your rate with a soft credit pull, which doesn’t affect your credit score. 

2. Gather your documentation

Once you know what options you have, start to gather up your financial documentation.

The exact paperwork you’ll need will vary slightly based on your loan type, but generally, you can expect to need:

  • Recent pay stubs
  • Your last two tax returns
  • Your last two W-2s
  • A copy of your driver’s license
  • Recent bank and retirement account statements
  • Mortgage information
  • Property details

Getting this documentation together early can help your application go more smoothly.

3. Compare quotes

Your next step is to get prequalified quotes from several top lenders. You can do this by providing some basic information about yourself to a prospective lender.

They may be able to run a soft inquiry on your credit report that won’t affect your credit score but will allow them to give you a realistic rate quote.

When comparing these quotes, make sure to take into account the interest rates you’re offered, the lender’s customer service record, and any fees they charge to originate and process your loan.

4. Apply with your best option

After you compare quotes, choose your lender and complete their application process. You’ll need to submit to a credit check, too, so you’ll want to avoid having too many hard inquiries on your credit report.

Ask the expert

Natalie Slagle


You can have up to six credit pulls in six months without it harming your credit score, so it can be acceptable to have one to three lenders pull your credit so you can get a full view of the costs and monthly payments.

The entire process of refinancing a HELOC takes between two and six weeks, on average. 

Alternatives to refinancing a HELOC

If you’re not sure you’re ready to refinance your HELOC into another HELOC, you do have other options that might be able to meet your financing needs.

Cash-out refinance. A cash-out refinance replaces your primary mortgage with a new mortgage and refunds the difference to you. You can use this money to pay off your HELOC. 

Home equity loan. You can refinance your HELOC into a home equity loan. Some lenders even have the option to convert your HELOC into a home equity loan. You’ll change from a variable APR to a fixed APR, and the loan becomes a true installment loan with regular, set monthly payments. You can’t borrow more funds when you need them, however. 

Sell your home. When you sell your home, the proceeds will go towards paying off your HELOC before coming to your pocket. 

Loan modification. As mentioned before, if you’re looking for the terms on your HELOC to be modified (such as an extended draw period), contact your current lender and see what they can do. 

Personal loan. A personal loan may allow you to pay off the HELOC; however, keep in mind a personal loan is an unsecured loan, so it usually has a much higher interest rate. 

Credit card. If what you need is more funds, financing with a card that offers a 0% introductory APR or balance transfer could be an option. 

Ask the expert

Natalie Slagle


Knowing how much money you need and how long it will take you to pay it back can help you decide which lending option is best for you. If you need a smaller amount that you can likely pay back within a year, selling your home or even taking out a home equity loan may not be necessary. Knowing the cost of creating each loan will be helpful to see if it is worth the potential lower interest rate. You may find that even though a personal loan has a higher interest rate, it may have a lower loan initiation cost and easier setup.


Can you refinance a HELOC with the same lender?

Yes, you can refinance a HELOC with the same lender. 

How does refinancing a HELOC affect my credit?

Refinancing a HELOC can affect your credit in several ways, depending on how you refinanced it. If you replace a HELOC with another HELOC, it will show up as a new account and may lower your credit score a little (but if you have a larger credit limit, it may increase because your credit utilization goes down). 

If you refinanced to a personal loan, it will show as an installment loan on your credit report instead of a revolving credit account. If the first HELOC is closed, you will have less access to credit and therefore, a higher credit utilization ratio, which may bring your credit score down a little. 

Keep in mind these changes to your credit score are temporary, and you’re better off making a decision that’s best for your finances instead of worrying about how it will affect your credit score. 

Are closing costs associated with refinancing a HELOC?

Whether or not you pay closing costs when refinancing a HELOC depends on your lender. It is possible to see costs if the lender needs an additional appraisal, or charges underwriting or origination fees. 

However, it’s also very common to see minimal closing costs on a HELOC–sometimes there are no closing costs at all. 

Can you refinance a HELOC into a first mortgage?

No, you can’t refinance a HELOC into a first mortgage. You can replace your first mortgage with another mortgage in a cash-out refi and pay off the HELOC with the proceeds if you’re looking to wrap the amount you have in your HELOC into a mortgage. 

Can I refinance a HELOC if I have less equity in my home than when I first took it out?

It may be possible to refinance a HELOC if your home has less equity (but still sufficient equity), but there are a number of factors your lender will consider. One is how much you owe on your HELOC and how that stacks up against how much equity remains in your home. 

If your HELOC is maxed out and your home has less equity, you might have trouble refinancing a HELOC. Either way, it’s best to consult with a lender for your individual situation.