Can you refinance a HELOC?

Already have a HELOC? Refinancing could help lower risk or stabilize payments—here's how it works.

If your home equity line of credit (HELOC) payments have been creeping up, you're not alone. Many homeowners with variable-rate HELOCs have watched their monthly costs increase with rising interest rates. You’ve got options, and refinancing your HELOC is one of them.

Yes, it’s possible to refinance a HELOC. Refinancing typically means you replace your existing HELOC with a new loan—either another HELOC, a home equity loan, or a refinanced mortgage—often to lower your rate, stabilize payments, or change loan terms.

Whether refinancing a HELOC makes sense for you depends on your current rate and payments, how much home equity you have, and what you're trying to accomplish. 

How refinancing a HELOC works

When you refinance a HELOC, you replace your existing line of credit with a new borrowing alternative. This isn't the same as modifying the terms of your current HELOC—you're paying off the old HELOC balance and starting fresh with new terms, a new lender (or possibly the same one), and potentially a different structure.

What typically changes:

• Interest rate and whether it's fixed or variable

• Monthly payment amount and structure

• Loan term and repayment period

• Draw period availability (if you refinance into another HELOC)

What stays the same:

• Your home is still used as collateral securing the loan

• You're still borrowing against your home equity

You'll go through a new application process, credit check, and likely pay closing costs—just as you did with your original HELOC.

Common ways to refinance a HELOC

You have several HELOC refinance options. Each comes with distinct advantages.

Refinance into a new HELOC

One option is to replace your existing HELOC with a brand-new HELOC from the same lender or a different one. This approach maintains the flexibility of a revolving credit line, which means you can borrow, repay, and borrow again during the draw period. This strategy may work well if you want continued access to funds. 

Refinance into a home equity loan

A home equity loan is a one-time installment loan, typically at a fixed interest rate. You receive a lump sum and make fixed monthly payments over a set term, typically five to 30 years. This tactic may appeal to homeowners who want predictable payments and only need to borrow once against their equity.

Refinance into a cash-out mortgage refinance

With a cash-out refinance, you refinance your first mortgage for more than you owe and use the extra funds to pay off your HELOC. If your draw period has ended, and/or if you close your HELOC, you’d reduce two payments down to one. This strategy could simplify your finances. It works best when you can get a new mortgage with an interest rate that's lower than what you currently pay.

Why homeowners refinance a HELOC

People typically refinance HELOCs in situations like these.

Variable rate increases are making payments unaffordable

If you have a variable rate HELOC and you opened it when rates were low, your payments might have gone up substantially. Refinancing into a fixed-rate HELOC protects you from further rate changes and could make budgeting easier.

Payment predictability

Variable-rate HELOCs adjust based on market conditions, which means your payment could change from month to month. Switching to a fixed-rate loan gives you the same payment every month for the life of the loan.

Draw period is ending

HELOCs have a draw period (typically five to 10 years) when you can borrow funds, followed by a repayment period when you can no longer draw and must pay down the balance. If your draw period is ending and you need more time to use your line of credit, it could make sense to get a new HELOC.

Consolidating other debt

You could use a HELOC or home equity loan to consolidate debt. By rolling multiple debts into one loan with a potentially lower rate, you might reduce your monthly payment amount or total interest cost .

Requirements to refinance a HELOC

While specific requirements vary by lender, you'll need to meet certain criteria to qualify for HELOC refinancing.

Available home equity

Most lenders require you to maintain at least 10% to 20% equity in your home after the refinance. This means your new loan amount plus your existing mortgage balance cannot exceed 80% to 90% of your home's current value. (Each lender sets its own limits.)

Credit profile considerations

Lenders generally look for credit scores in the mid 600s or higher. Some lenders allow lower scores. Your credit history should ideally show timely payments and manageable debt levels relative to your income.

Income verification

You'll need to demonstrate stable income sufficient to cover your new loan payment along with your other obligations. Expect to provide recent pay stubs, tax returns, or other documentation of your income.

Closing costs

Refinancing typically costs 2% to 5% of the loan amount in closing costs. These expenses can include application fees, appraisal fees, title search fees, and other lender charges. Some lenders offer HELOCs with no closing costs, but these typically come with higher interest rates.

HELOC refinance vs. refinancing your mortgage

Choosing between refinancing just your HELOC and refinancing your entire mortgage requires some number crunching.

If your first mortgage has a low interest rate, refinancing only your HELOC likely makes more sense. This approach lets you keep your favorable mortgage terms while addressing only the HELOC. You maintain your current mortgage rate and avoid resetting your loan term.

If your mortgage rate is higher than current market rates, a cash-out refinance might be worth considering. This strategy combines your mortgage and HELOC into a single loan, potentially at a lower rate than your current mortgage. You'll have just one monthly payment to manage, which could simplify your finances.

The tradeoff involves costs and flexibility. A cash-out refinance could have higher closing costs if you refinance a larger loan amount. You'll also lose any flexible borrowing capability you had with the HELOC. If you think you might need to access additional funds in the future, keeping a HELOC structure might serve you better.

Alternatives to refinancing a HELOC

Refinancing isn't your only possibility for a HELOC. One of these alternatives might work better for you.

Pay down the balance aggressively

If you can afford higher payments temporarily, focusing on paying down your HELOC balance quickly could reduce both your interest costs and your exposure to rate increases. This approach may work best if you're close to paying off the balance or expect a lump sum (like a work bonus) soon.

Adjust your payment strategy

Some HELOCs allow you to switch between interest-only and principal-plus-interest payments. If you've been making only interest payments, switching to payments that include principal could help you pay down the balance faster, even if it increases your monthly cost.

Consider other consolidation tools

For smaller HELOC balances, a personal loan might offer fixed rates and terms without using your home as collateral. While personal loan rates are typically higher than home equity products, they may carry less risk for you because your home isn't on the line if you encounter payment difficulties.