Can You Refinance a Home Equity Line of Credit?

Homeowners value the home equity line of credit because it offers a revolving credit line and borrowers don’t have to refinance their primary mortgage to get cash out. The HELOC is always secured by the borrowers home equity and lenders allow them to borrow funds as needed during a draw period (typically 10 years), followed by a repayment period (10–20 years). The home equity line of credit features variable rates tied to the prime rate fluctuate or the repayment period nears, monthly payments can increase significantly. Refinancing a HELOC can lower rates, extend repayment terms, or consolidate debt, offering financial relief. This article explores how homeowners can refinance a home equity line of credit, how to do it, the top 12 lenders in 2025 with their rates, APRs, and HELOC closing costs and key considerations.

Can You Refinance a HELOC?

Homeowners can refinance a HELOC if they meet the banks lending and credit requirements. Consumers typically refinance a home equity line of credit through three methods: a new HELOC, a home equity loan, or a cash-out refinance. Each option suits different financial goals:

  • New HELOC: Roll the existing HELOC balance into a new line of credit, restarting the draw period with potentially lower rates or better terms. This is ideal for those needing continued borrowing flexibility.

  • Home Equity Loan: Convert the equity line of credit balance into a fixed-rate 2nd mortgage with predictable payments, suitable for those wanting stability over variable rates. Check the current home equity loan rates.

  • Cash-Out Refinance: Replace your primary mortgage with a larger one, paying off the HELOC and consolidating debts into a single payment. This works best if mortgage rates are lower than HELOC rates.

HELOC refinancing is often considered when the draw period ends, as payments shift from interest-only to principal and interest, or when home equity rates rise, making payments unaffordable. If refinancing a home equity line of credit isn’t feasible, a loan modification with the current lender may adjust terms to avoid default.

Why Refinance a HELOC?

Refinancing can address several issues:

  • Lower Interest Rates: If rates drop or your credit improves, a new HELOC or loan may offer a lower APR, reducing interest costs.

  • Manageable Payments: Extending the draw period or switching to a fixed-rate loan can lower monthly payments.

  • Debt Consolidation: Combine high-interest debts (e.g., credit cards) with the HELOC for a single, lower-rate payment.

  • Avoid Balloon Payments: Refinancing before the repayment period prevents payment spikes.

  • Access More Funds: Increased home equity may allow borrowing additional funds for renovations or investments.

However, refinancing involves risks, such as home equity line of credit closing costs (2–5% of the loan amount), potential prepayment penalties, and the risk of foreclosure if HELOC payments are missed, as the home remains collateral.

Eligibility Requirements

To refinance a HELOC, lenders typically require:

  • Home Equity: At least 15–20% equity in your home, calculated as the appraised value minus outstanding mortgage and loan balances.

  • Credit Score: A minimum of 620–660, though 740+ secures better rates.

  • Debt-to-Income Ratio (DTI): Below 43–50%, showing ability to manage payments.

  • Income Verification: Pay stubs, tax returns, or business records for self-employed borrowers.

  • Home Appraisal: To confirm current market value, often required unless waived by the lender.

  • Homeowners Insurance: Proof of active coverage.

Some lenders have stricter criteria for refinances than original HELOCs, so check requirements carefully.

Steps to Refinance a Home Equity Line of Credit

  1. Assess Your Needs: Determine if you need lower payments, a fixed rate, or additional funds. Calculate your home equity (home value minus mortgage balance) to estimate borrowing capacity.

  2. Check Your Finances: Review your credit score, DTI, and income stability. Improve your credit by paying down debts or correcting credit report errors.

  3. Compare Lenders: Obtain quotes from at least three lenders, focusing on APRs, fees, and terms. Use online calculators, like NerdWallet’s HELOC calculator, to estimate borrowing limits.

  4. Gather Documentation: Prepare proof of income, tax returns, mortgage statements, and property details (e.g., tax receipts, HOA fees).

  5. Apply for HELOC Refinancing: Submit applications to chosen lenders. Multiple applications within 45 days count as one credit inquiry, minimizing score impact.

  6. Underwriting and Appraisal: Lenders assess your financials and order an appraisal to verify home value and combined loan-to-value (CLTV) ratio (typically 80–90%).

  7. Close the Loan: Pay second mortgage closing costs (if applicable) and sign agreements. Funds are disbursed in 7–40 days, depending on the lender.

Top 12 Lenders for HELOC Refinance in 2025

Below are the top 12 lenders offering HELOC refinances in 2025, based on rates, APRs, closing costs, and availability. According to RefiGuide, new opportunities are being rolled out from competitive banks and lenders every day for HELOC refinancing. According to BankRate, the home equity line of credit rates and terms are accurate as of June 2025, but vary by credit score, LTV, and location. Always verify with lenders the current pricing.

  1. Bank of America

    • APR: 7.25%–10.75% (variable, with 0.25% autopay discount).

    • Closing Costs: None (no application, annual, or usage fees).

    • Details: Offers up to 85% CLTV, no fees, and fixed-rate lock options. Available nationwide. (Bank of America)

  2. Navy Federal Credit Union

    • APR: 7.75%–18% (variable, assumes 750 FICO).

    • Closing Costs: None (covers settlement, appraisal, and title fees).

    • Details: Requires membership (military-affiliated). Flexible terms, no minimum draw. (Navy Federal)

  3. U.S. Bank

    • APR: 7.95%–11.60% (variable, assumes 730+ FICO, 60% LTV).

    • Closing Costs: None, but 1% early closure fee (max $500) if closed within 30 months.

    • Details: Available in 47 states, fixed-rate options. (U.S. Bank)

  4. Citizens Bank

    • APR: 7.88%–10.88% (variable, 0.5% autopay discount). Introductory 5.99% for 6 months or 6.99% for 12 months.

    • Closing Costs: None (if open 3+ years).

    • Details: Offers $5,000 minimum home equity lines, available in 19 states. (Citizens)

  5. LoanDepot

    • APR: 7.74%–9.84%

    • Closing Costs: Varies, often low-cost option for high credit qualified borrowers.

    • Details: Available in 49 states, fixed-rate options.

  6. PNC Bank

    • APR: 7.90%–11.50% (variable, varies by state).

    • Closing Costs: Varies by state (e.g., $2,050–$2,175 for $100,000 in NY).

    • Details: Choice HELOC with fixed-rate options, tax payment segments at 0% interest. (PNC)

  7. Truist

    • APR: 8.00%–12.00% (variable or fixed per draw).

    • Closing Costs: None.

    • Details: Offers interest-only payments during 10-year draw period, fixed-rate options. (Truist)

  8. Fifth Third Bank

    • APR: 7.85%–11.25% (variable, fixed-rate lock for $95 fee).

    • Closing Costs: None.

    • Details: Flexible draws via check, card, or ATM. Interest-only for 10 years. (Fifth Third)

  9. BMO Harris

    • APR: 8.10%–11.75% (variable, assumes 700 FICO).

    • Closing Costs: Varies, often none for qualified borrowers.

    • Details: Available in 48 states, fixed-rate lock option. (BMO Harris)

  10. State Employees’ Credit Union (SECU)

    • APR: 2.75%–18% (variable, quarterly adjustments).

    • Closing Costs: None.

    • Details: NC-focused, requires membership. Flexible terms, no PMI. (SECU)

  11. Comerica Bank

    • APR: 7.75%–18% (variable, 0.25% autopay discount).

    • Closing Costs: None for lines ≤$500,000; 2% early termination fee if closed within 2–3 years.

    • Details: Available in AZ, CA, FL, MI, TX. (Comerica)

  12. Flagstar Bank

    • APR: 8.00%–21% (variable).

    • Closing Costs: $75 annual fee (waived first year).

    • Details: Offers standard and GoalBuilder HELOCs ($5,000 minimum), nationwide. (Flagstar)

Refinancing a Home Equity Line of Credit for Debt Consolidation

Background: Sarah, a Seattle homeowner, had a $50,000 HELOC from 2019 with a variable rate of 9.5% entering its repayment period in 2025. Facing a payment increase from $395 (interest-only) to $625 (principal and interest), she sought to refinance to manage payments and consolidate $15,000 in credit card debt at 20% interest.

Solution: Sarah approached Bank of America for a new HELOC with a 7.75% APR (0.25% autopay discount) and no closing costs. Her home, valued at $400,000 with a $200,000 mortgage, had sufficient equity (50%). She rolled the $50,000 HELOC balance and $15,000 credit card debt into a new $65,000 HELOC, maintaining a 10-year draw period with interest-only payments of $380/month. She also locked $30,000 into a fixed-rate option at 8% for predictable payments.

Outcome: By refinancing, Sarah reduced her monthly payments by $245 (from $625 HELOC + $300 credit card to $380) and saved $2,100 annually in interest. The new draw period gave her flexibility for future renovations, and Bank of America’s no-fee structure minimized costs.

HELOC Refinancing Considerations

  • Costs: Closing costs (2–5% of loan amount) and potential prepayment penalties can offset savings. Some lenders, like Bank of America, waive fees.

  • Rate Increases: Variable-rate HELOCs may rise with the prime rate, increasing costs unless locked into a fixed rate.

  • Foreclosure Risk: Defaulting risks losing your home, as it’s collateral.

  • Eligibility Challenges: Stricter criteria (e.g., 20% equity vs. 15% for original HELOC) may disqualify some borrowers.

  • Market Fluctuations: Declining home values may reduce equity, limiting refinancing options.

Tips for Refinancing Success

  • Shop Around: Compare offers from at least three lenders to secure the best rates and terms.

  • Improve Credit: Pay down debts or correct credit errors to qualify for lower APRs.

  • Consider Fixed Rates: Opt for fixed-rate home equity loans or locks to avoid rate hikes.

  • Plan Repayment: Ensure your budget accommodates payments during the repayment period.

  • Consult a Tax Advisor: HELOC interest may be tax-deductible for home improvements, but rules vary.

Refinancing a HELOC in 2025 can lower payments, secure better rates, or consolidate debt, but it requires sufficient equity, a solid credit score, and careful lender comparison. The top 12 lenders, like Bank of America, LoanDepot and Navy Federal, offer competitive APRs (7.25%–21%) and flexible terms, with many waiving closing costs. By understanding your cash-out needs, preparing documentation, and weighing risks, you can refinance effectively to achieve your financial goals.

References

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