If you default on this type of loan, your lender can repossess your property.īelow, we provide an overview of the most common ways to refinance a HELOC. Super important: It's crucial to recognize that a HELOC is a loan secured by your home, so whichever refinancing option you choose, make sure you can comfortably afford your new monthly payment. 'Refinancing a HELOC can be advantageous if you're looking to get away from a variable-rate to lock in a fixed-rate, or if you're trying to avoid the payment shock of a HELOC that has come to the end of its draw period and will now require larger principal and interest payments,' says Greg McBride, chief financial analyst at Bankrate, CNET's sister site.

There are multiple ways to refinance a HELOC, and the best one for you will depend on factors including how much equity you have in your home and your current interest rate. Below we outline some of the ways to refinance a HELOC. If your draw period is coming to an end and you're looking for ways to keep your monthly HELOC payment low, or you simply want to lock in a lower interest rate, refinancing could be an option. When that happens, it may be advantageous to refinance your HELOC. Once the repayment period begins, however, your monthly payment will increase as you are required to make payments toward your principal loan balance and the interest. One of the major benefits of a HELOC is that you can elect to make interest-only payments during the draw period that means you can borrow a significant sum of money over an extended period, while only making minimal payments. The standard HELOC draw period is 10 years, but it can range from five to 20 years. A HELOC is revolving line of credit, so you can make repeated withdrawals over an extended period of time, called the draw period. This type of loan lets you borrow against the equity in your home - that is, the value of the home above what you owe on the mortgage - and works, in some ways, like a credit card. Common uses for HELOC funds are home renovations, major life expenses like college tuition or to pay down high-interest debt like credit card debt.

Taking out a home equity line of credit, or HELOC, is a straightforward way to tap your home's equity - often at an interest rate that's lower than what you'll get with other types of financing.

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