When should I refinance home equity line of credit (HELOC)?


If you have a credit line that is expensive even if you are making only interest-only payments, you would probably want to get rid of it and refinance your home equity line of credit (HELOC) into a fixed rate.

The right time to do that depends on your equity that you have in the house. If your house is situated in an area where properties are appreciating, you may like to wait for a year or two before you refinance the home equity line of credit, especially if it is a HELOC with interest only payments. Why do that?

Firstly, your house most likely will keep appreciating and you will build more equity.

Secondly, you want to get rid of the HELOC anyway, as it is tied to the prime rate plus a 2-3% margin, and the prime rate may very well go up. With an interest only payments on the home equity line of credit, you are saving on payments, and as you'll be refinancing the HELOC into a fixed rate, perhaps you better wait until any refinance penalties no longer apply.

Thirdly, you are not going to refinance the HELOC only, right? There is no point refinancing home equity line of credit separately from your first mortgage. You may be having troubles if you refinance the HELOC separately, pulling additional equity, and then come back later and combine what loans you have.

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