You’ve enjoyed borrowing against your home’s equity with a Home Equity Line of Credit (HELOC), but now the draw period is reaching an end. If you’re interested in refinancing before the repayment period starts, this guide will help you understand the process for doing so and the options available to you.
What You Should Know About Refinancing a HELOC
Why Should I Consider Refinancing?
There are a variety of reasons refinancing a HELOC can be beneficial. By refinancing your HELOC you maintain quick access to the equity in your home should you need it for future expenses. You may also be able to reduce your monthly payment, or even gain access to more funds because your home’s value increased over time.
Sitting down with a lender can help you determine if this route is the right one for your unique situation.
What Are My Options?
First, consider opening a new HELOC to pay off your existing HELOC’s balance and maintain access to the equity in your home. If you are near the end of your draw period, you may be eligible for low introductory rates on the new HELOC and would likely have no closing costs.
Another option is to refinance your HELOC into a home equity/second mortgage loan. You’ll still be borrowing against the equity of your home, but you can start making a dent in the interest and principal right away because there’s no draw period. You will not have access like a line of credit, but you will be able to lock into a fixed interest rate for the term that best meets your needs.
As a third option, you can actually refinance your HELOC balance into your home’s mortgage. This may be a good option if you’ve struggled to manage multiple payments, or if you’re interested in stretching out the timeline you have to make payments. Note this option may come with higher fees upfront but will allow you to refinance at today’s low mortgage rates.
Lastly, If you do not have another mortgage on your home and you’re ready to say goodbye to your current HELOC, General Electric Credit Union (GECU) has a variety of equity rich solutions for you to choose from. These solutions and our commitment to helping you open new doors are just a few reasons we were named the Best Credit Union in Cincinnati in 2021.
How Do I Know if I’m Eligible?
Just like when you initially applied for the HELOC, you have to get approved again to refinance it. A lender will weigh your debt-to-income ratio, how much equity you have in your home, your credit history, and the loan-to-value ratio (which compares the loan amount to your home’s value) to determine if you’re a candidate.
The right financial partner can untangle the complexities of the refinancing process, so you understand it and feel confident in your decision. A GECU team member can work with you to provide a customized solution that works best for you! Want to meet in person? Schedule an appointment online in advance.
- Everything You Need to Know About Home Equity Lines of Credit
- 3 Reasons to Refinance Your Home
- Why You're Not 'Too Old' to Buy Your Dream House