Should I Refinance My HELOC into a Fixed-Rate Mortgage?

Should I Refinance My HELOC into a Fixed-Rate Mortgage?

When you’re in need of cash, a home equity line of credit (HELOC) can seem pretty great. They come with low (often interest-only) payments for many years, you can use as much or as little as you like (similar to a credit card), and they’re fairly easy to come by once you have some equity in your property.

But compared to other mortgage products? They’re not the most financially sound option — especially when interest rates on traditional loans are at record lows.

To be fair, HELOC rates can be low, too, but they also come with inherent risks.

Do you currently have a HELOC? Here’s why you might consider refinancing into a 30-year, fixed-rate loan before it’s too late.

1. More stability

HELOCs are adjustable-rate products, meaning your interest rate can — and will — change over time. This can send both your payments and the amount you’re paying to borrow the money up, often with very little notice.

Fixed-rate mortgages offer much more stability and consistency. You’re guaranteed a set rate for a long period of time, and though the monthly amounts of principal and interest will vary as you pay down the loan, the total payment of your mortgage is likely to stay the same. That makes it better for your budget (not to mention your overall peace of mind). 

2. A more manageable payment when you refinance your HELOC into a fixed-rate mortgage.

Many HELOCs require interest-only payments for the first 10 years or so. Which those low monthly payments are certainly tempting, they also mean quite the shock once your actual balance comes due. Depending on how much you borrow, you could owe hundreds, even thousands more each month by the time your draw period expires. 

How financially prepared are you for that? Unless you’ve been saving tirelessly and keeping a tight rein on how you spend your HELOC, it’s probably time to consider refinancing before those big payments are required. 

3. Less temptation to spend.

HELOCs work like credit cards. You can pull funds from the loan as needed, using them to pay for renovations, college tuition, car repairs, or any other cost that comes up. Their flexibility makes them very tempting to use — especially since you only see the small, interest-only payments for many years. It’s almost as if you never spent the money!

Clearly, this can be dangerous. Spending too much racks up your balance and only increases your payments once they come due. It could even mean serious financial trouble down the line. 

Refinancing removes this temptation. There’s no credit line you can pull from, and you have a set balance and predictable payment from the start. It’s a good way to get a handle on your finances and ensure you stay on budget for the long haul.

Still have costs to cover?

If you’re not quite done using your HELOC, a refinance can still help. Applying for a cash-out refinance would allow you to leverage a low-interest, fixed-rate loan, while also giving you excess cash to use toward home improvements or whatever other expenses you might be facing. 

And the big benefit? It’d be a lump sum of cash — so you’re not tempted to over-spend or rack up more debt.

Are you interested in refinancing your HELOC into a more stable, fixed-rate mortgage? Get in touch with an Embrace Home Loans representative in your area today. They can help you determine the best path forward.

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Aly Yale

Aly J. Yale is a freelance writer focusing on real estate, mortgage, and the housing market. Her work has been featured in Forbes, Bankrate, The Motley Fool, Business Insider, The Balance, and more. Prior to freelancing, she served as an editor and reporter for The Dallas Morning News. She graduated from Texas Christian University's Bob Schieffer College of Communication with a major in radio-TV-film and news-editorial journalism. Connect with her at or on Twitter at @AlyJwriter.