How to Refinance a HELOC with Fixed Rate Refinance Loans

Borrowers across the country are refinancing their HELOC with fixed rate equity loans and 30-year home refinance mortgages. It might be a wise time to get rid of your adjustable rate HELOC and convert the home equity line to a fixed rate mortgage that offers a fixed monthly payment and hedge against inflation.

What Is HELOC Refinancing and Can You Get Fixed Rate Equity Loan?

Refinancing with fixed rate home mortgages are recommended and borrowers can choose from conventional, FHA, VA and non conforming loan types. Our mortgage lenders offer home refinance loan conversions to help refinance your revolving lines. Check out the low rate HELOC programs for fixed rate refinancing.

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Why Should I Refinance a HELOC or Credit Line?

Lower Monthly Payments: Transitioning from interest-only payments to potentially higher principal and interest payments during the repayment period can be challenging. Refinancing your HELOC into a first mortgage or fixed equity loan offers the opportunity to reduce your interest rate and monthly payments, making the repayment period more manageable.

Access More Funds: If your property’s value has appreciated since obtaining your HELOC, refinancing provides the chance to tap into additional home equity. The extra funds can be utilized for home remodeling, covering your child’s college expenses, or even funding a vacation.

Convert to a Fixed Rate: If you currently have an adjustable-rate or variable-rate HELOC, converting to a fixed-rate equity loan or cash out refinance can provide more stable monthly payments. Fixed interest rates are commonly associated with home equity loans and cash-out refinances, presenting alternative options for refinancing your HELOC.

Adjust Repayment Terms: Modifying your HELOC’s repayment terms involves altering the timeline for repaying your loan. Shortening the terms may reduce home equity line of credit interest charges and lower interest rates, albeit with an increase in monthly payments. Conversely, lengthening the original home equity terms might raise interest charges but allows for lower monthly payments. Check today’s HELOC Requirements.

Consider the Option to Refinance into a New HELOC

Choosing to get a new HELOC to refinance the existing line of credit offers the advantage of extending the draw period and deferring the repayment phase. This approach might be suitable if you are confident in your ability to meet full payments once the repayment period commences. However, it may not be advisable if retirement is imminent, payment ability is uncertain, or if minimizing interest payments is a priority.

HELOC Refi Benefits: Postpone Financial Burden: When you refinance your existing HELOC with a new home equity line of credit, you delay significant payments during the repayment period. If you simply make an agreement with your existing HELOC lender, you could lower upfront closing costs if you just extend the line.  It doesn’t’ hurt to save money by reducing the lending fees and origination costs associated with refinancing into a new home equity loan or cash out refinance. Sometimes refinancing a HELOC into a new home equity line of credit provides you the opportunity to take out additional funds if your equity allows.

Downside of Refinancing HELOC with Another HELOC: There is always the Potential for Higher Interest Charges if the adjustable rates trend upward. There’s also risk of paying more in interest over the loan’s lifespan. Last but not least, there is an increased Debt Temptation: Accessing more funds may lead to overspending and an escalation of debt.

Refinancing Adjustable Rate HELOC with Fixed Home Equity Loans

As the Federal Reserve Bank continues to push the interest rate higher, homeowners are watching their adjustable rate mortgage payments inch up as well. One of the ways to stop your rising mortgage payment is to refinance to a 30-year mortgage or a home equity loan with a fixed rate.

“The intention is for the federal authorities to persist in raising rates until inflation subsides,” states mortgage broker Mike Johnson. As anticipated, interest rates continued their ascent throughout 2022 and 2023. However, observing a decline in the housing sector, the Federal Reserve has decided to reduce key interest rates by 0.50. In 2024, the Fed is set to further decrease key rates, contributing to a modest refinance boom.

A noticeable trend has emerged with home prices experiencing a decline due to the impact of rising interest rates, slowing down new buyer activity. Recent reports indicate homeowners resorting to price reductions in an effort to attract buyers.

Interestingly, homeowners are opting for higher interest rates on 30-year fixed-rate mortgages to secure a stable interest rate. Faced with diminishing equity, some homeowners may consider refinancing their entire debt to secure a fixed interest rate.

Current interest rate averages for the week show home equity loans maintaining a relatively steady rate, while home equity lines of credit (HELOCs) are exhibiting an upward movement, increasing by four points in the past week. Variable rate home loans pose challenges for qualification, as lenders often factor in the adjusted payment when assessing debt-to-income ratios.

Consumer advocates unanimously recommend refinancing the highest-cost and longest-term debt, as it yields the most significant benefits. According to Bank Rate, individuals refinance for various reasons, such as deciding to retain a house longer than initially planned, seeking stability in future plans, or anticipating a prolonged increase in mortgage rates.

Opting for a shorter-term fixed-rate mortgage could aid in rebuilding the equity extracted from your home. Transitioning from an adjustable-rate mortgage (ARM) to a fixed-rate mortgage (FRM) can help avoid balloon payments. If property values have appreciated, this conversion may even allow you to extract additional equity from your home in the process.  – article written by Nick Rian

How to Find Lenders to Refinance Your HELOC

If your credit history includes instances of missed payments or if your credit score is low, obtaining approval for a new mortgage or line of credit to refinance your HELOC may be more challenging. We always recommend timely payments that can have a favorable effect on your credit score, potentially improving your likelihood of being approved for the best rate on a mortgage or home equity line of credit.

BD Nationwide is a mortgage marketing company that has strong relationships with leading direct lenders across the country. We have cultivated these relationships and would be honored to help you fins mortgage lenders for a HELOC, home equity loans or fixed rate mortgage refinance.