How to refinance a HELOC: advantages and requirements

Are you managing a home equity line of credit (HELOC) with unpredictable monthly payments due to a shifting interest rate? Many homeowners rely on a HELOC as a flexible line of credit, tapping into their property’s value for renovations, debt consolidation, or emergencies. However, the variable interest rate typical of a HELOC can complicate budgeting, leaving you wondering how to stabilize your finances. Refinancing your HELOC—whether into a new home equity line, a home equity loan, or a cash out refinance—might be the solution to regain control over your monthly payments and repayment terms.

This comprehensive guide explores how to refinance a HELOC, outlining its benefits, requirements, and alternatives. By the end, you’ll know whether refinancing your line of credit aligns with your financial goals, and how to work with a lender like Better to simplify the process.

Can You refinance a HELOC?

Absolutely, you can refinance a HELOC, and it’s often a savvy move for homeowners seeking better terms. Refinancing replaces your existing home equity line with a new loan or line of credit, potentially lowering your interest rate, fixing your monthly payments, or adjusting your repayment timeline. Whether you’re dealing with a high interest rate or want to repay your HELOC more comfortably, refinancing offers flexibility to align your mortgage-related debts with your budget.

Here’s how the refinancing process typically works:

1. Evaluate your current HELOC: Review your balance, current interest rate, and repayment schedule to understand what you’re working with.
2. Explore options: Compare lenders, or work with a lender like Better to compare products and offerings tailored to your goals, credit score, and equity.
3. Apply for refinancing: Submit details like your credit score, income, and home equity to secure a new line of credit or loan, potentially covering closing costs.

How Better simplifies refinancing

Traditional lenders can make refinancing a HELOC feel overwhelming with paperwork and delays. Better, however, streamlines the process with a 100% digital platform. Homeowners can check eligibility for a refinanced home equity line in minutes, receive decisions within 24 hours, and access funds quickly—ideal for those eager to repay their line of credit or adjust the product to their needs without hassle.

....in as little as 3 minutes – no credit impact

Should you refinance your HELOC?

Deciding to refinance your HELOC requires weighing its pros and cons. This choice impacts your mortgage, monthly payments, and long-term financial health, so let’s break it down.

Advantages of refinancing a HELOC

• Lower interest rate: If you have a fixed-rate home equity line, refinancing can secure a reduced interest rate, especially if rates have dropped since you opened your HELOC. A lower interest rate cuts your monthly payments and saves money over the repayment period.

• Decrease monthly payments: Extending your repayment term or locking in a better interest rate can shrink your monthly payments, freeing up cash for other priorities like your mortgage or savings.

• Fixed rate stability: Most HELOCs feature a variable interest rate, causing unpredictable monthly payments. Refinancing into a home equity loan or exploring a cash out refinance offers consistent payments, simplifying budgeting.

• Consolidated payments: Combine your HELOC and mortgage through a cash out refinance, merging them into one loan with a single monthly payment. This reduces complexity and could lower your overall interest rate.

• Access more equity: If your home’s value has risen, refinancing your home equity line lets you borrow more, providing a larger line of credit for projects or to repay high-interest debts.

Disadvantages of refinancing a HELOC

• Closing costs: Refinancing a HELOC involves []closing costs](https://better.com/content/how-much-does-it-cost-to-refinance), appraisal fees, and sometimes application charges. These expenses might outweigh the savings from a lower interest rate, so calculate carefully.
• Extended repayment: Stretching your repayment term to reduce monthly payments means paying interest longer, increasing the total cost of your loan or line of credit.
• Reduced home equity: Converting your HELOC into a home equity loan or pulling extra equity via a cash out refinance lowers your home’s equity, potentially limiting future borrowing options.
• Credit score impact: Applying to refinance can ding your credit score temporarily. A higher debt load from a new loan might also make it tougher to qualify for additional credit later.

HELOC refinance requirements

To refinance your HELOC, you’ll need to meet lender criteria, which vary but typically include:

• Credit score: A minimum credit score of 620-680 is common, though Better accepts 640, making it accessible for more homeowners looking to adjust their line of credit.
• Debt-to-income (DTI) ratio: Lenders prefer a DTI below 50%, ensuring you can handle monthly payments on your HELOC and mortgage.
• Home equity: You’ll need sufficient equity—usually 80-90% of your home’s value. Better allows refinancing up to 90%, maximizing your line of credit.

Meeting these essential HELOC requirements ensures you can repay your refinanced HELOC without straining your finances.

Four options to refinance a HELOC

Depending on your goals, here are four ways to refinance your home equity line:

1. Get a new HELOC: Replace your current HELOC with a fresh line of credit, potentially at a lower interest rate or better repayment terms. This suits homeowners who value the flexibility of a home equity line.
2. Pay it off with a home equity loan or with cash from a cash out refinance: Swap your HELOC for a home equity loan with a fixed interest rate and predictable monthly payments. This option simplifies budgeting and helps you repay your debt steadily.
3. Refinance your HELOC and mortgage together: Use a cash out refinance to merge your HELOC and mortgage into one loan. This can lower your interest rate and streamline monthly payments, though it may involve higher closing costs.
4. Convert to a fixed-rate product, like a home equity loan: A home equity loan (or HELOAN) can be a great option when locking your interest rate to stabilize monthly payments. This keeps the flexibility of a line of credit while eliminating rate fluctuations.

Alternatives to refinancing a HELOC

If refinancing your HELOC doesn’t fit, consider these alternatives:

• Modify your loan: Ask your lender to tweak your HELOC terms—perhaps extending the repayment period. This avoids closing costs and keeps your existing line of credit.
• Get a personal loan: Use a personal loan to repay your HELOC, consolidating debt with a fixed interest rate and set monthly payments. Note that personal loans often have higher rates than a home equity line.
• Sell your home: If your HELOC debt exceeds your equity and refinancing isn’t an option, selling your home could clear your mortgage and line of credit, offering a fresh start.

Why refinance with Better?

Better stands out among lenders by making HELOC refinancing fast and user-friendly. Here’s why homeowners choose Better to refinance their home equity line:

• Speed: Check eligibility in minutes and get decisions within 24 hours—no lengthy waits to adjust your monthly payments.
• Flexibility: Access up to 90% of your home’s value, providing a generous line of credit to repay debts or fund projects.
• Transparency: No hidden closing costs or fees, ensuring you know exactly what you’ll repay.
• Digital ease: Manage your HELOC or home equity loan entirely online, from application to close.

For example, imagine you have a $50,000 HELOC with a variable interest rate of 9%, causing your monthly payments to jump unpredictably. With Better, you could refinance into a new home equity line at a competitive rate or opt for a home equity loan with fixed monthly payments, all while avoiding excessive closing costs.

Key considerations before you refinance

Before you refinance your HELOC, ask yourself:

• Do I need lower monthly payments? A longer repayment term or lower interest rate can ease cash flow.
• Can I handle closing costs? Factor these into your decision to ensure refinancing pays off.
• How’s my credit score? A solid credit score unlocks better rates from lenders.
• What’s my equity level? More equity means a bigger line of credit or loan.

Understanding refinance points can also help you decide if paying upfront costs for a lower rate makes sense for your situation.

Take control of your home equity

Refinancing a HELOC empowers you to manage your line of credit, reduce your interest rate, and stabilize monthly payments. Whether you’re consolidating your mortgage and HELOC via a cash out refinance, switching to a home equity loan, or renewing your home equity line, the right strategy can enhance your financial freedom.

Better makes refinancing your HELOC seamless, offering rapid decisions and access to funds without the red tape of traditional lenders. Ready to repay your HELOC on your terms? Take the first step today.

....in as little as 3 minutes – no credit impact