Many borrowers don’t realize they can refinance their Home Equity Line of Credit (HELOC). When refinancing, you still need to meet lender requirements to be eligible for the loan. This will include a minimum percentage of equity in your home, a sufficient income, an acceptable debt-to-income ratio, and a good credit score. Your home will also need to be appraised for the lender to determine the amount you can borrow.
If you have a HELOC and your draw period is over and the repayment period has or is about to begin, you may be looking for an option to lower your monthly payment. If you still owe a sizeable amount of money on your HELOC, your monthly payment can increase significantly. Refinancing into another HELOC can help. If you are creditworthy, you can refinance your HELOC into another HELOC or into a Fixed Rate Home Equity Loan.
Refinancing a HELOC with a new HELOC
If you have enough equity in your home, a new HELOC may enable you to pay off your existing HELOC and start over with a new draw period and the interest-only repayment option. With rates so low, you might even secure a lower rate in the process. If you are struggling with payments, it may buy you the time you need to get back on your feet financially. On the flip side, you may just be interested in refinancing because you’d like continued access to cash for home improvements and other expenses.
Benchmark Federal Credit Union offers our Ultimate HELOC. Features of the Ultimate HELOC include an introductory 6-month rate of 1.99% APR*. It also offers the ability to borrow up to 90% of the appraised value of your home on amounts between $10,000 and $250,000. Borrowers can choose between two convenient payment options: interest-only or principal and interest. Click for complete details.
Refinancing into a new HELOC is a good solution if you feel confident you’ll be able to make the full payments when the repayment period begins. In addition, if you have built more equity in your home while paying on your existing HELOC, you may even be able to get more cash out if needed.
Refinancing a HELOC with a Home Equity Loan
With interest rates at all-time lows, it may be time to refinance your variable rate HELOC balance into a Fixed Home Equity Loan. It will provide you with the security of a fixed rate for the life of the loan and predictable monthly payment. Similar to a HELOC, a Fixed Home Equity Loan uses the equity in your home as collateral for the loan. The loan offers a fixed rate and requires principal and interest payments monthly over the term of the loan. Because you make principal payments immediately, your loan balance will decrease faster. Home Equity Loans often come with fees, so it’s important to take this into consideration when comparing lenders.
Preparing for a HELOC Refinance
When shopping for a lender for refinancing a HELOC, it’s important to compare fees; as well as interest rates. Depending on the lender, the fees associated with a HELOC may actually make it more expensive, even with a decrease in interest rate.
When you apply to refinance a HELOC, your lender will need the following documentation:
- Personal identification and information on yourself and any co-applicant.
- Income and employment information; including pay stubs and W-2s.
- Mortgage details; including balance and monthly payment.
- Property information; including the value of the home, property taxes, and insurance premiums.
- Details on all outstanding debt.
A Summary of Refinancing a HELOC
The bottom line, most borrowers are interested in refinancing their existing HELOC to:
- Lower their monthly payments
- Lock in a lower interest rate
- Switch from an adjustable to fixed rate
- Have continued access to borrowing
- Refinance into a larger loan to access additional cash
- Consolidate higher-interest debt
To qualify for HELOC refinancing, you need to have adequate equity to meet lender requirements; as well as sufficient income and good credit. If your credit history has changed for the worse since your first HELOC, refinancing might not be the best option for you. You can refinance your HELOC by opening a new HELOC or using a Home Equity Loan to pay off your HELOC. Some lenders may even allow you to request a loan modification to your existing loan. Be sure to weigh all costs involved.
Whatever the need, refinancing your existing HELOC may be a good solution. Speak to a Benchmark FCU Representative to determine if you qualify. Always keep in mind that when you borrow against the equity in your home you are putting your home up as collateral; thus, it is important to keep up with you loan payments.
*APR = Annual Percentage Rate. Rates are for qualified borrowers and are subject to change without notice. The introductory rate of 1.99% APR is for the first 6 months. At the end of the introductory term, the rate reverts to rate according to credit score at the time of application: as low as Wall Street Journal Prime Rate – .51% for 80% LTV** and Wall Street Journal Prime Rate – .26% for 81-90% LTV**. The floor rate is 3.99% APR. $100 application fee for loans under $25,000. An early termination fee of $250 if HELOC is paid off & closed in the first 12 months.