Featured Home Equity Loan Providers
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3.8 Best ForBest For High Debt-to-Income Ratio Borrowers Max LTV*Up to 90% Max Loan Amount$500,000 Minimum Credit Score680 |
4.3 Best ForBest for Fast Funding Max LTV*Up to 95% Max Loan Amount$400,000 Minimum Credit Score640 |
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| Loan Provider | Best For | Max LTV* | Max Loan Amount | Minimum Credit Score | See More | |
|---|---|---|---|---|---|---|
| Best For High Debt-to-Income Ratio Borrowers | Up to 90% | $500,000 | 680 | APPLY NOW | ||
| Best for Fast Funding | Up to 95% | $400,000 | 640 | APPLY NOW | ||
| No Interest or Monthly Payments | Up to 75% | $600,000 | 500 | APPLY NOW |
| Loan Provider | Best For | Max LTV* | Max Loan Amount | Minimum Credit Score | See More | |
|---|---|---|---|---|---|---|
| Best For High Debt-to-Income Ratio Borrowers | Up to 90% | $500,000 | 680 | APPLY NOW | ||
| Best for Fast Funding | Up to 95% | $400,000 | 640 | APPLY NOW | ||
| No Interest or Monthly Payments | Up to 75% | $600,000 | 500 | APPLY NOW |
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Why You Can Trust the MarketWatch Guides Team
Here’s a breakdown of how we reviewed and rated top home equity lenders
32
Providers MonitoredOur team researched more than two dozen of the country’s most home equity lenders, including large companies like Navy Federal Credit Union, U.S. Bank, TD Bank, Third Federal and Spring EQ.
640
Data Points AnalyzedTo create our rating system, we analyzed each home equity lender’s disclosures, licensing documents, marketing materials, sample loan agreements and websites to understand their loan offerings and terms.
40
Loan Features TrackedOur team regularly collects data on each company’s loan offerings and terms, such as minimum and maximum loan amounts, origination fees and discounts.
13
Professionals ConsultedBefore we began our research process, we consulted with financial advisors and industry experts to ensure our evaluations covered the banking product aspects that matter most to potential customers.
Ways To Refinance a HELOC
There are a number of ways to refinance a HELOC depending on your unique situation.
Refinancing With a Fixed-Rate Loan
Most HELOCs come with variable interest rates, making it difficult to predict how much your payments will be month-to-month. A personal loan or home equity loan may be options borrowers can use to refinance into a fixed-rate loan.
However, a fixed-rate home equity loan will likely have a higher rate than you’re currently paying. Personal loans also typically have higher interest rates than home equity products because personal loans are usually unsecured – meaning you don’t pledge collateral like your home to the lender in the event you fail to make your payments.
Personal loans and home equity loans are typically deposited as one lump sum into your bank account or paid directly to an existing loan. You can use that lump sum to pay off the balance of your HELOC and switch to a predictable fixed monthly payment.
Refinancing With a New HELOC
Another way to refinance a HELOC is to roll your existing balance into a new HELOC. While this isn’t always an option, some lenders may allow you to transfer the balance of your original HELOC into a new one with different terms. The benefit of this approach is you’ll enter a new draw period with the new HELOC and, in most cases, you’ll only have to make interest payments until the repayment period of the new loan begins.
While this may seem like delaying the inevitable — and may actually cost more in the long run due to the risk of interest rates rising — refinancing into a new HELOC can be a useful option in some circ*mstances. For example, if your credit score has improved, you may want to refinance into a new HELOC to get a lower interest rate.
However, refinancing into a new HELOC can be risky. If you’re refinancing because you’re having trouble making your monthly payments, starting over with a new draw period may cause temptation to continue borrowing. Once the new draw period ends, your financial situation could be even more tenuous.
Refinancing With a Cash-Out Refinance
A cash-out refinance is another popular way to refinance a HELOC. A cash-out refinance involves taking out a new mortgage on your home for more than you currently owe. You receive the difference in cash and can use some or all of the capital you receive to pay off the balance on your HELOC.
In essence, this means that you roll your HELOC into the cost of your new mortgage, where you’ll only be responsible for making one monthly payment. If you take this approach, it’s important to pay attention to interest rates as well as the closing costs and fees associated with taking out a new mortgage.
To calculate whether a cash-out refinance is in your best interest, you’ll need to consider the new interest rate and your new monthly mortgage payment, as a cash-out refinance will replace your current home mortgage with a new mortgage loan. In general, a cash-out refinance may be beneficial if your interest rate will go down. On the other hand, if your interest rate will increase significantly, you may want to consider other options.
>> Related: Learn more about cash-out refinance vs. home equity loans
Should I Refinance My HELOC?
At some point during the draw period or the repayment period, you may find yourself considering ways to refinance your HELOC to lower your monthly payment or increase your access to the equity in your home. Only you know what’s best for your unique financial situation, but be sure to weigh the following factors before making a decision.
Assessing the Need for Refinancing
Before you look into refinancing your HELOC, assess the reasons why you’re considering a refinance in the first place. If you’re refinancing to lower your interest rate, you might save money on the cost of borrowing from your HELOC.
On the other hand, if you’re refinancing because you can no longer afford the monthly payments, you may end up moving into a loan that’s more costly over the long term. Whatever your reasons for refinancing, make certain you understand both your goals for doing so and the potential short-term and long-term consequences of a refinance.
“Refinancing a HELOC can be beneficial under certain conditions, but it’s essential to conduct a thorough analysis to determine if it’s right for an individual’s situation,” said Doug Greenberg, President of Pacific Northwest Advisory. Greenberg recommended reviewing your current HELOC terms and conditions, determining your goals for refinancing and considering the terms and conditions of a new HELOC before making a decision.
Benefits of Refinancing
There are several potential benefits to refinancing a HELOC. Refinancing may provide you with the opportunity to:
- Lower your monthly payment
- Extend your repayment term
- Move into a fixed-rate loan with more predictable monthly payments
For example, if your credit score has improved since you initially took out a HELOC, you may benefit from a refinance to reduce your interest rate and lower your monthly payments. Alternatively, if the payments become too high for you to manage, refinancing into a longer loan term may help you continue making timely payments.
Drawbacks of Refinancing
Of course, there are also potential drawbacks to refinancing a HELOC, such as the following:
- Potentially refinancing into a higher interest rate
- Prepayment penalties, which may be a condition of your specific loan
- Additional fees and closing costs
- As with any loan secured by your home, the lender could seize your property if you don’t make payments
If a refinance results in a higher interest rate, make sure you can manage the higher monthly payments. A higher interest rate isn’t always a drawback — for instance, when you’re refinancing into a fixed-rate loan to better anticipate your monthly payments.
Additionally, you may not want to refinance your HELOC if your loan terms include a prepayment penalty for early payoff or refinancing. If the prepayment penalty outweighs the cost of a lower interest rate, it might be more beneficial to remain in a loan with a higher interest rate.
Finally, every time you refinance a loan, you’ll need to pay the associated fees and closing costs. Make sure the benefits of the refinance terms outweigh the cost of the refinance itself.
How To Refinance a HELOC
While there are several ways to refinance a HELOC, the process for each is generally the same.
1. Evaluate Your Current HELOC
First, gather some information about your loan. The two easiest pieces of data to gather are your current outstanding balance and your repayment terms. You’ll also need to know about any fees you may owe, such as annual fees or transaction fees.
From there, assess the interest rates you’re paying or may pay in the future. Most HELOCs have variable interest rates, so your rate may change as frequently as every month. To understand your interest rate, find out the underlying index your lender uses in its loans, the margin it adds on top of the index to determine your interest rate and your loan’s rate cap.
2. Compare Lenders and Offers
Once you’ve evaluated your current HELOC, shop different lenders to find the best refinancing option. Shopping around for the best offer can help you pay less in interest and find loan terms that work best for your unique situation.
As you’re comparing offers, research the interest rates each lender offers, the fees charged for loan origination and the loan terms. Seek out customer reviews to learn more about what experience you might expect from working with a specific lender.
3. Apply for Refinancing
To apply for a HELOC refinance, gather the necessary documents a lender will review to see if you qualify. In general, lenders will want to know the following:
- If you have sufficient equity in your home (typically a minimum of 10% to 20% equity)
- Your credit score
- Your debt-to-income ratio
While specific documentation requirements vary between lenders, you’ll likely also need to provide a home appraisal, current mortgage statements and banking statements to a prospective lender. Depending on the lender, you may need to cover the cost of the professional home appraisal yourself.
What Is a HELOC?
A HELOC is a revolving line of credit that allows you to borrow money against the equity in your home. As you pay back the amounts you borrow, you can continue to draw funds as you need them, much like you would with a credit card. In general, the amount you can borrow is a percentage of the equity you have in your home when you take out a HELOC.
When you first open a HELOC, you enter a draw period in which you can withdraw money from your line of credit as often as you’d like. You may be required to make minimum payments during the draw period, which might be interest-only or a portion of the principal you borrowed.
Once the draw period ends, you enter the repayment period. During the repayment period, you can no longer borrow money from the line of credit without applying for a renewal. Some HELOCs allow borrowers to pay back the principal in monthly installments, while others require the principal to be repaid as a lump sum — also known as a balloon payment.
>> Related: Learn more about how to get the best HELOC rate
Alternatives to Refinancing a HELOC
While evaluating your options, you may determine that refinancing a HELOC isn’t in your best interest. Greenberg also recommended “consulting with a financial adviser to get a holistic view of how refinancing fits into your overall financial goals. Speak with mortgage professionals or bankers to understand available products, terms and rates. And if you’re considering the tax implications or the possibility of interest deductions, consult with a tax professional.”
Alternatively, you could consider the following options:
Home Equity Loan Conversion
If the variable interest rate is causing uncertainty in your budget, you may consider converting your HELOC into a fixed-rate home equity loan. Essentially, you’ll apply for a home equity loan and use the funds to pay off your HELOC. From there, you’ll be responsible for paying back the balance on the home equity loan.
The predictability of payments with a fixed interest rate is an obvious advantage to this approach. However, fixed-rate loans typically offer higher interest rates than the potential of a variable-rate loan. If you think interest rates may start to rise, converting a variable-rate HELOC into a fixed-rate home equity loan may be a sound choice.
Repayment Strategies
In some cases, continuing to make payments on your existing HELOC may be the best option. If you can afford the payments but are looking for ways to repay the loan faster, consider making extra payments toward the principal amount. Just be aware of any prepayment penalties that your lender may have in place.
Additionally, the U.S. Department of Housing and Urban Development offers several resources to help struggling homeowners avoid foreclosure, including access to a housing counselor and tips to negotiate with your lender.
>> Related: Learn more about the best home equity loan rates
The Bottom Line
There are a variety of ways to refinance a HELOC, including fixed-rate loans, new HELOCs, cash-out refinances and more. As you consider your refinancing options, carefully assess your reasons for refinancing so you can accurately research and compare different options.
Frequently Asked Questions About Refinancing HELOCs
There are many ways to refinance out of your current HELOC, including refinancing into a fixed-rate home equity or personal loan, a new HELOC or a cash-out refinance. If you’re finding it difficult to make payments on your HELOC, contact your lender to assess what options are available to you.
Yes, you may be able to refinance an existing HELOC with another bank if you’ve determined your current HELOC is no longer a good fit. To make this happen, you’ll need to initiate an application for a new HELOC with the bank you’re considering.
The fastest way to pay off a HELOC is to make extra payments toward the principal balance. Whether you’re making extra payments during the draw period or the repayment period, be sure to check if your HELOC has a repayment penalty.
Many lenders are willing to negotiate a HELOC payoff. In most cases, if a borrower defaults on their payments, the primary lender has first rights to the proceeds of any foreclosure. This is an incentive for secondary lenders to work with their borrowers to prevent foreclosure. In some cases, a lender may be willing to negotiate interest rates or develop payment plans.
Editor’s Note: Before making significant financial decisions, consider reviewing your options with someoneyou trust, such as a financial adviser, credit counselor or financial professional, since every person’s situation and needs are different.
If you have feedback or questions about this article, please email the MarketWatch Guides team at editors@marketwatchguides.com.
Hillary GaleContributing Writer
Hillary Gale is a personal finance writer who focuses on financial planning, investing and money mindsets. She has been published in Clever Girl Finance and Wealthtender, and she is the CEO and founder of Gale Creative Agency.
Kelly LarsonSenior Editor
Kelly Larson is a senior editor with 14 years of experience creating and optimizing data-driven, reader-focused digital content. Kelly enjoys running and exploring the outdoors with his sons.
