Your home equity line of credit (HELOC) may follow you for decades. A typical draw period is 10 years, and repayment periods range from five to 20 more years. You can refinance your line of credit with a different bank if you determine that your HELOC is no longer the best option.
Depending on whether you want to replace your current HELOC terms or borrow more money, refinancing can be simple.
This article will explain why you might want to replace a line of credit, how to refinance your HELOC, and what requirements lenders will have.
Yes, you can transfer your HELOC to another property by refinancing your current HELOC into a new one on the new property This is a common way to access the equity you’ve built up in your home to use as a down payment or closing costs on a new home.
However, there are a few things to keep in mind before you transfer your HELOC:
- You’ll need to qualify for a new HELOC. The lender will consider your credit score, income, and debt-to-income ratio to determine if you’re eligible.
- You’ll need to have enough equity in the new property. The lender will want to make sure that you have at least 20% equity in the new property before they’ll approve your HELOC transfer.
- You’ll need to pay closing costs. Closing costs for a HELOC transfer can vary, but they’re typically around 2% to 5% of the loan amount.
If you’re considering transferring your HELOC to another property, it’s important to shop around and compare rates from different lenders. You should also make sure that you understand the terms of the new HELOC before you sign any paperwork
Here are some of the benefits of transferring your HELOC to another property:
- You can access the equity you’ve built up in your home. This can be a great way to get a down payment on a new home or to cover closing costs.
- You can get a lower interest rate. HELOCs typically have lower interest rates than other types of loans, such as personal loans or credit cards.
- You can have more flexibility with your payments. HELOCs typically have variable interest rates, which means that your payments may fluctuate over time. However, you can usually make extra payments on your HELOC without penalty.
Here are some of the risks of transferring your HELOC to another property:
- You could lose your home. If you’re unable to make your HELOC payments, the lender could foreclose on your home.
- You could end up paying more in interest. If interest rates rise, you could end up paying more in interest on your HELOC than you originally planned.
- You could damage your credit score. If you miss payments on your HELOC, it could damage your credit score.
The choice to move your HELOC to a different property is ultimately a personal one. You should weigh the benefits and risks carefully before making a decision.
Frequently Asked Questions
Can I transfer my HELOC to a different lender?
Yes, you can transfer your HELOC to a different lender. However, you’ll need to qualify for a new HELOC with the new lender.
What happens to my old HELOC when I transfer it?
Your old HELOC will be closed when you transfer it to a new property.
Can I use my HELOC to buy an investment property?
Yes, you can use your HELOC to buy an investment property. However, if you’re using your HELOC to purchase an investment property, the lender might demand a higher credit score or a larger down payment.
Additional Resources
- Bankrate: Ways to Refinance a HELOC
- LendEDU: Can I Refinance My HELOC With Another Bank?
- NerdWallet: HELOC to Investment Property: Can You Do It?
One excellent way to access the equity you’ve accumulated in your house is to transfer your home equity loan (HELOC) to another property. However, before choosing a choice, it’s crucial to carefully consider the advantages and disadvantages. If you’re thinking about moving your home equity line of credit, make sure to compare rates offered by various lenders. Prior to signing any papers, you should also confirm that you comprehend the terms of the new HELOC.
Your new HELOC terms would be worse
Refinancing your HELOC with a different bank may, in certain circumstances, result in terms that are more expensive over the course of the repayment or that don’t fit within your budget. This might happen if interest rates have increased since you originally obtained your HELOC or if the lender believes you pose a greater risk because of a higher debt-to-income ratio, a lower loan-to-value ratio, or a lower credit score.
To determine whether a refinance is worthwhile for your budget and financial stability in this case, it’s critical to consider the advantages and disadvantages. Sometimes refinancing a HELOC—even with worse terms, such as a higher interest rate—could be worthwhile.
For instance, refinancing may be the best option for your budget even though it will cost more in the long run if you’re getting close to the end of your draw period but are unable to begin repaying the principal amount as planned. However, many borrowers have options that are less complex and less costly.
When you shouldn’t refinance a HELOC with another lender
Now, you might not want to refinance your HELOC with a different lender in the following four situations: