Can I refinance a HELOC into a fixed rate?

Yes, you can refinance a HELOC, and one common reason is to move off a variable rate into a fixed one before rates rise or before your draw period ends. You can refinance it into a home equity loan, into a new HELOC, or fold it into a cash-out refinance of your first mortgage, depending on which fits your goal.

People usually do this for one of two reasons. To lock a fixed payment, or to deal with a draw period that is about to end and push their payment up.

Why would I refinance a HELOC?

The most common reason is escaping a variable rate. A HELOC rate is tied to the prime rate, which sits at 7.50 percent right now, so it moves when the Federal Reserve moves. Refinancing into a fixed rate makes your payment predictable. The other common reason is a draw period ending, which can raise your payment sharply as principal gets added.

What are my options for refinancing a HELOC?

There are three main paths. Refinance the HELOC into a fixed-rate home equity loan, which locks the balance at a set payment. Open a new HELOC to reset the draw period and terms. Or roll the HELOC into a cash-out refinance of your first mortgage, combining both into one loan. Each has different costs and tradeoffs.

Should I refinance into a home equity loan or a new HELOC?

It depends on whether you still want flexible access. A home equity loan gives you a fixed payoff and a locked rate, which suits someone done borrowing. A new HELOC keeps a revolving line open, which suits someone who still wants to draw. The basics of each are in what a home equity loan is and what a HELOC is.

When does rolling it into a cash-out refinance make sense?

Mainly when today's first-mortgage rate is at or below your current rate. Folding a HELOC into a new first mortgage re-prices your whole balance, so it only pays off if you are not giving up a much lower rate on your first mortgage. The full tradeoff is in home equity loan versus cash-out refinance. As Emmett Clark, licensed in 18 states with access to more than 240 wholesale lenders, I run these three paths side by side so you can see which costs least over the time you plan to keep the home.

Is there a cost to refinance a HELOC?

Usually yes, though it varies. A new home equity loan or HELOC has its own closing costs, and a cash-out refinance carries costs similar to any first mortgage. Weigh those against the savings from a lower or fixed rate over how long you will hold the loan.