Can you refinance a home equity loan?

Yes, you can refinance a home equity loan.  

For many borrowers, their home equity loan was the right choice when they took it out, but after living with it for several years they may want a change. This could be because their financial situation has changed, rates have dropped or they are looking to access more of their home equity. All of these can be done through a home equity loan refinance. 

Is there a part of your home equity loan you would like to change? See what your new loan would look like when you start a refinance application. 

Reasons to refinance a home equity loan

There are many benefits borrowers see when refinancing a home equity loan. Some of the reasons homeowners choose to refinance a home equity loan are: 

• Lowering monthly payments: refinancing can secure a lower rate on your home equity loan or extend the term of your loan, allowing you smaller monthly payments over a longer period.
• Reduce the length of your loan: Shortening the length of your loan will mean higher monthly payments but fewer interest payments.
• Accessing more of your home equity: Refinancing your home equity loan could give you access to more funds if your home value has increased.

How to refinance a home equity loan

After you have found out how a home equity loan refinance could benefit you, you may be wondering how to get started on the refinance process. The steps you should take to refinance your home equity loan are as follows: 

• Review your current loan terms: Reviewing your current loan term and interest rate can help you determine if refinancing will save you money*.
• Check your available home equity​: If you are looking to refinance your loan to access more funds you will have to make sure you meet the minimum equity requirements.
• Compare lenders and loan options: Different lenders may offer slightly different rates, comparing lenders may allow you to get the loan that suits you best. When refinancing, make sure you also compare other loans that access home equity, as how you get the funds and structures of another loan may suit you better.
• Submit an application: After you have gone through the previous steps, you will be ready to submit your home equity loan refinance application.

Options for refinancing a home equity loan

When refinancing a home equity loan, you have several loan options to refinance your current loan to. Understanding these options will allow you to determine which one best suits your needs. 

Replace it with a new home equity loan

If you are looking to update the terms of your current home equity loan, you can refinance it into a new home equity loan. This will replace your existing home equity loan with a new one, without touching your primary mortgage. You can also use this option to access more of your home equity. 

Refinance into a HELOC

A HELOC, or Home Equity Line of Credit, offers borrowers a line of credit that they can draw on as needed. For borrowers with a home equity loan who might benefit from the additional draws that a HELOC offers, refinancing into a HELOC could be a beneficial option. 

Cash-out refinance

​When refinancing into a cash-out refinance, your new loan will replace your current home equity loan as well as your primary mortgage. This option reduces the number of monthly payments you make, from two to only your new loan, as well as potentially securing a lower rate on your new loan.  

When should you refinance a home equity loan?

To get the most out of your home equity loan, these are some times when you should consider a refinance. 

Interest rates have fallen

Refinancing a home equity loan after interest rates have fallen lower than your current rate is one way you could lower your monthly mortgage payments. Having a lower rate means the less you will have to pay in interest, potentially saving you money over the life of your loan.  

Your credit profile has improved

If your credit profile has improved since you got your original home equity loan, refinancing could result in a lower rate on your new loan.  

Lenders use your credit profile to determine a borrower’s creditworthiness, or ability to pay back their loan in a timely and consistent manner. If your credit profile has improved, lenders will see you as a more trustworthy borrower and could get you a better rate on your new loan. 

You need different repayment terms

​Refinancing can be a powerful tool for borrowers looking to pay off their loan sooner or extend the time they have.  

Using a refinance to shorten the time you have on your loan will result in larger monthly payments but also means less interest paid over the life of your loan. If you are hoping to make smaller monthly payments, refinancing to extend your loan term could help you out. 

Refinancing a home equity loan: how to get started

​When you are ready to refinance a home equity loan, you can start an online application. 

An online home equity loan refinance application will connect you with a trusted Loan Officer who can help you along the application process. Your Loan Officer can also provide information and answer any questions you may have about your new loan. 

Ready to begin the home equity loan refinance process? Start your online application today. 

_{*Savings, if any, vary based on consumer’s credit profile, interest rate availability, and other factors.} 

_{Applicant subject to credit and underwriting approval. Restrictions apply.} 

_{Information provided is for educational purposes only. It should not be construed as financial or legal advice or instruction. Rate does not guarantee or assume liability for the accuracy, completeness or timelines of the information. You should conduct additional research before making any mortgage related decisions.}