Managing Debt

Can you refinance a HELOC?

Yes, you can refinance a HELOC by either taking out a new home equity loan from Discover® Home Loans that pays off your existing HELOC or by refinancing your mortgage and HELOC together through a cash-out refinance by Discover.

Reasons to refinance your HELOC

Before refinancing your HELOC, be sure to understand your financial goals so you can best select a home equity product that matches your needs.

Lock in a lower interest rate

If you can improve your interest rate by refinancing your HELOC, you may be able to save on monthly payments or interest charges over the life of the loan.

While this can seem like straightforward savings, be sure to understand the full costs of the refinanced loan (including closing costs).

Convert to a fixed rate

If you have an adjustable-rate or variable-rate HELOC, you may be able to convert to a fixed-rate loan for more stable monthly payments.

Most home equity loans and cash-out refinancing also feature fixed rates, which are two ways to refinance your HELOC.

Adjust your repayment terms

Adjusting your HELOC’s repayment terms means changing how soon you will pay off your loan.

You can shorten terms to potentially reduce HELOC interest charges and lower your interest rates, although your monthly payments will increase.

Or you can lengthen your HELOC’s original terms, which may increase your interest charges but can allow you to pay less each month.

Borrow more

If you have a new need to borrow funds, you can take out a new home equity loan or cash-out refinance that both pays of your original HELOC and offers more borrowing.

Risks to consider when refinancing a HELOC

Once your borrowing goals are in place, you can evaluate available refinancing options and understand the potential risks involved.

Prepayment penalties

Paying off your existing HELOC may incur prepayment penalties. Before you commit to refinancing your HELOC through another type of home equity loan, be sure to consult the original lender to understand these fees.

Additional borrowing costs

Each time you borrow, you may incur the cost of borrowing set by the lender, such as origination fees and closing costs.

Additional HELOC refinances will also likely increase those costs to process and close a new loan.

While Discover home equity loans and cash-out refinancing include $0 in closing costs, you should be sure to understand the full cost of refinancing your HELOC before you commit.

4 ways to refinance your HELOC

There are four main ways to refinance a HELOC:

New loan to pay off existing HELOC

If you are looking to refinance your HELOC, you could take out a new home equity loan from Discover with better rates and terms to pay off existing HELOC in full. If your new loan is for more than you owe on the HELOC, you can use the additional funds as you like.

Refinance HELOC with existing lender

Working with the original HELOC lender, you can use improvements in your financial status (such as credit score, income, or outstanding debt) to refinance your original HELOC into a new HELOC with improved terms.

Convert to a fixed-rate HELOC

If your current HELOC includes a variable interest rate, some HELOC lenders will allow you to convert to a fixed-rate HELOC. However, you may incur additional costs for this conversion that can outweigh the benefits of moving to a fixed-rate product.

Use a cash-out refinance to pay off HELOC

A cash-out refinance can refinance both your mortgage and any existing home loans (such as a HELOC) into a single loan.

You can also borrow more funds after you pay off your remaining mortgage and HELOC balance. To see how a cash-out refinance can help you consolidate your HELOC, use cash-out refinance calculator from Discover.

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