Reasons to refinance a HELOC

There are many reasons why a borrower would refinance their home equity line of credit (HELOC)*, including lower interest rates, switching to fixed rates, extending their draw period and increasing their HELOC limits. 

A HELOC generally works in two periods: a draw period and repayment period. During your draw period, you will be able to access the funds based on the equity you own in your home. After your draw period, you will enter a repayment period, during which can no longer access your home’s equity and will have to repay your HELOC. 

HELOCs with Rate give you an upfront amount of cash based on your home’s equity. As you repay your HELOC you will have the option to make additional draws. 

Refinancing the HELOC you have can improve the terms of your loan, allowing you to potentially pay less each month or increase the time and amount you can borrow**. 

Are you ready to take advantage of the benefits that come with a HELOC refinance? Apply now! 

Refinancing your HELOC will change the terms of your loan to benefit you. Here are a few ways refinancing your HELOC can benefit you. 

If current interest rates are lower than when you got your original HELOC, a refinance on your current HELOC could drop your interest rates. A drop in interest rates could lower your monthly payments and the amount you pay over the life of your loan. 

If your HELOC has a variable rate***, your payments could change from month to month. It can be hard to predict your payments if they are different each month, so refinancing to a fixed-rate HELOC could help you plan out each of your payments.  

HELOCs with Rate come with a fixed rate from the start. 

You can extend your draw period through a HELOC refinance. With a HELOC refinance, you essentially will restart your HELOC and draw period, giving you a longer amount of time to borrow against your home equity without having to immediately repay your loan. 

Yes, if you are looking to fund any home improvements or other expenses, you can increase HELOC limits through a refinance.  

If your home’s value has increased since your original HELOC, a refinance could let you access that extra value. Typical HELOCs allow you to borrow up to 85% of a home’s value, minus your first mortgage’s remaining balance. 

Some lenders might let you change the terms of your HELOC, including limits, without a refinance.  

​If you are looking to refinance your current HELOC, these are the steps you can take: 

You will need to meet the credit score minimum and debt-to-income (DTI) ratio maximum, and have at least 20% equity in your home before being eligible for a HELOC refinance. Lenders will also want to check to see that you have a strong record of on-time payments for your current HELOC.  

The exact eligibility requirements for credit score and DTI ratio could slightly vary depending on your lender. The higher a credit score and lower DTI ratio you have, the better the chance you will receive favorable terms on your refinance. 

​Your lender will be able to tell you which documents you will need to in order to apply and give you an estimate of how much you could borrow. 

Lenders will ask you for specific documentation when you apply. Your current lender will be able to tell you which documents you should prepare before starting your application.   

Your current lender could also give you an estimate on how your loan would look when you refinance your HELOC. This will include seeing an estimate of your increased HELOC limit. 

Checking your eligibility is one way you can prepare for your application. Another way to prepare for your application is by gathering the documents your lender will ask for. Typical documents lenders ask for are: 

• Proof of income: You can show proof of income through W2s, tax returns or pay stubs. 

• Property documentation: Home insurance, property tax bills and your current HELOC statements are some of the property documents you will need to provide. 

• List of assets: Additional assets that can improve your chances of refinancing a HELOC are bank statements, investment accounts and retirement account statements. 

​A fresh home appraisal is generally required to refinance your HELOC. A new appraisal allows lenders to see the current value of your home. If your home has increased in value, you could end up with higher equity in your home and a larger HELOC limit. 

Borrowers are typically required to pay for the new home appraisal themselves. 

​Once you have everything ready, submitting your application might be the easiest step. Depending on your lender, you may have to go in-person to refinance your HELOC. Some lenders do offer online refinancing for HELOCs and other loan types. 

Closing costs can range from 3% to 5% of your total loan amount. Closing costs can vary based on loan type and lender, but some common closing costs you may see are: 

• Loan originator fee: Charges for processing and underwriting the loan. 

• Credit report costs: Any fees associated with lenders pulling your credit report. 

• Attorneys fees: The cost of reviewing and preparing mortgage documents. 

If your home equity has grown or interest rates have dropped since your original HELOC, you may want to consider starting the process to refinance your HELOC. 

If you have checked your eligibility, connected with a lender, prepared your documents and received your home appraisal, or would like to speak to a lender to see what your HELOC refinance options may be, you can start your application online. 

An application will connect you with a professional Loan Officer who will review ypur details and show you the terms of your HELOC refinance. 

Start your application and see how refinancing your HELOC could help you! 

_{*Rate’s home equity line of credit (HELOC) is an open-end product where the full loan amount (minus the origination fee) will be 100% drawn at the time of origination. The initial amount funded at origination will be based on a fixed rate; however, this product contains an additional draw feature. As the borrower repays the balance on the line, the borrower may make additional draws during the draw period. If the borrower elects to make an additional draw, the interest rate for that draw will be set as of the date of the draw and will be based on an Index, which is the Prime Rate published in the Wall Street Journal for the calendar month preceding the date of the additional draw, plus a fixed margin. Accordingly, the fixed rate for any additional draw may be higher than the fixed rate for the initial draw. This product is currently not offered in the states of New York, Kentucky, West Virginia, Delaware and Maryland. The HELOC requires you to pledge your home as collateral, and you could lose your home if you fail to repay. Property insurance is required as a condition of the loan and flood insurance may be required if your property is located in a flood zone. Borrowers must meet minimum lender requirements in order to be eligible for financing. Available for primary, second homes and investment properties only. Dependent on minimum credit score and debt-to-income requirements. Occupancy status, lien position and credit score are all factors to determine your rate and max available loan amount. Not all applicants will be approved. Applicants subject to credit and underwriting approval. Contact Rate for more information and to discuss your individual circumstances. Restrictions Apply.} 

_{** Savings, if any, vary based on the consumer’s credit profile, interest rate availability, and other factors. Contact Rate for current rates. Restrictions apply.} 

_{*** The variable rate home equity line of credit (HELOC) is an open-end product where the borrower can withdraw funds and make interest only payments during the draw period. Monthly payments will increase to include both principle and interest payments after the draw period has ended. A minimum 90% of the total approved HELOC amount must be disbursed. The remaining 10% of the approved credit line can be drawn down later as needed during the draw period. The monthly variable interest rate is based on an Index, which is the Prime Rate published in the Wall Street Journal plus a fixed margin. This product is currently only available in Arizona, California, Illinois, Massachusetts, and New Jersey. The HELOC requires you to pledge your home as collateral, and you could lose your home if you fail to repay. Property insurance is required as a condition of the loan and flood insurance may be required if your property is located in a flood zone. Borrowers must meet minimum lender requirements in order to be eligible for financing. Available for primary, second homes and investment properties only. Property type, loan-to-value, and FICO restrictions and requirements apply. Dependent on minimum credit score and debt-to-income requirements. Occupancy status, lien position and credit score are all factors to determine your rate and max available loan amount. Not all applicants will be approved. Applicants subject to credit and underwriting approval. Contact Rate for more information and to discuss your individual circumstances. 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.} 

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