How to Refinance Your HELOC: A Complete Guide to Your Options

Your home represents far more than shelter—it’s potentially your biggest financial asset. For many homeowners, a home equity line of credit (HELOC) has become an increasingly accessible way to tap into that equity and access cash when needed. Data from CoreLogic reveals that during the first two quarters of 2022, homeowners opened over 807,000 HELOCs worth $131 billion combined, marking the highest volume since 2007.

Yet here’s the catch: HELOC rates often climb significantly higher than traditional mortgage rates, leaving borrowers with sticker shock when repayment obligations arrive. The good news? If you’re struggling with those payments, several pathways exist to refinance your HELOC and ease the burden.

Understanding HELOC Fundamentals

Before exploring refinancing routes, it’s essential to grasp how HELOCs function. A HELOC operates as a line of credit backed by your home’s equity—essentially a high-limit credit card that lets you withdraw funds as needed, up to your approved limit.

The structure works in two phases. During the draw period (typically 10 years), you withdraw money whenever you choose and pay only interest charges. Once this period concludes, the repayment phase begins—usually spanning 20 years—where you can no longer make withdrawals and must repay all borrowed principal.

Because HELOC interest rates are typically variable rather than fixed, your monthly payments can fluctuate. This variability means your repayment obligations might eventually rival your standard mortgage payment, especially given that HELOC rates can reach into double digits.

Qualifying for HELOC Refinancing

Not every homeowner can refinance their HELOC, as lenders maintain specific eligibility criteria:

Home Equity Requirements Most lenders cap lending at 80% of your home’s appraised value. If your existing mortgage already exceeds this threshold, approval becomes challenging.

Credit Score Considerations A FICO score of at least 670 positions you favorably, though lower scores aren’t necessarily disqualifying—you’ll simply encounter elevated interest rates. A strong payment history strengthens your application significantly.

Debt-to-Income Ratio Lenders typically want your total debt payments to represent no more than 43% of your gross monthly income. This metric reflects your ability to manage additional obligations.

Three HELOC Refinancing Strategies

Assuming you meet qualification criteria, three primary refinancing approaches merit exploration:

Obtain a Fresh HELOC

The straightforward approach involves applying for a new line of credit—either through your current lender or elsewhere—and deploying those funds to eliminate your existing HELOC balance. This strategy effectively resets your draw period, allowing you to resume interest-only payments during the new 10-year draw phase.

This option appeals to those facing immediate payment pressures. However, exercise caution: by resetting the timeline, you could substantially increase total interest paid over the loan’s lifetime unless you actively reduce principal.

Convert to a Home Equity Loan

A home equity loan offers a different structure. Rather than a flexible line of credit, you receive a lump sum at closing and begin interest payments immediately. While this might not dramatically slash your monthly obligations, it delivers advantages through stability: most home equity loans carry fixed rates and fixed payments, providing predictability as you work toward debt elimination.

Merge Into Your Primary Mortgage

Consolidating your HELOC and mortgage into a single refinanced loan simplifies your financial landscape. This approach carries one significant consideration: whether sacrificing a favorable existing mortgage rate makes sense.

If you locked in historically low rates when you purchased your home, refinancing means accepting today’s higher rates. Yet this strategy can prove economically sound when your HELOC balance is substantial. You might pay a marginally elevated rate on your mortgage, but the HELOC’s interest component—potentially reaching 10%—could compress significantly. Current 30-year fixed mortgage rates have averaged below 7% through early 2023, creating potential savings on your HELOC portion even if your overall mortgage rate increases slightly.

When Refinancing Isn’t Available

Insufficient home equity or credit challenges might prevent lenders from approving your refinance application. These alternatives warrant consideration:

Modify Your Existing Loan While lenders bear no obligation to modify loans, many prefer adjusting terms through lower rates or extended repayment periods rather than facing foreclosure proceedings. Eligibility typically requires having held the loan for a minimum period with established payment history.

Pursue a Personal Loan Obtaining a personal loan from a bank, credit union, or online lender provides another avenue for paying off your HELOC. Like home equity loans, personal loans offer fixed payments and fixed rates. The tradeoff: personal loan APRs frequently exceed HELOC rates, and a large balance might exceed what you can borrow.

Reassess Your Housing Situation As a final resort, selling your property eliminates the HELOC obligation entirely. Remember that since your HELOC is secured by your home, non-payment creates foreclosure risk.

Moving Forward with Confidence

HELOCs unlock substantial capital for homeowners, but that access demands repayment discipline. When mounting payments become problematic, these refinancing options and alternatives provide potential relief. Given the complexity of these decisions, consulting a qualified finance professional ensures you select the path most aligned with your unique circumstances.