Can You Refinance a Home Equity Loan?

A home equity loan is a fixed rate, lump sum second mortgage that lets you borrow against the equity you’ve built in your property. Because it comes with a fixed interest rate and predictable monthly payments, many homeowners find it easier to budget compared to other borrowing options.

Your home equity is calculated by subtracting all mortgage balances from your home’s current market value. For example, if your home is worth $450,000 and you owe $250,000 on your primary mortgage plus $50,000 on an existing home equity loan, you have $150,000 in remaining equity. 

Refinancing a home equity loan means taking out a new loan to pay off and replace your current loan. You might do this to get a lower interest rate, change your repayment term or borrow a larger loan amount if your equity has grown. 

It’s helpful to understand how a home equity loan differs from related products:

As a nationwide lender, CrossCountry Mortgage offers multiple products that can help you adjust how you borrow against your home’s equity.

Yes, you can refinance a home equity loan. Lenders treat the process similarly to refinancing a primary mortgage, evaluating your current finances, home value and creditworthiness. 

As of April 2026, home values remain elevated in many markets compared to 2020-2021 levels. Home equity loan rates have moderated from their 2023 peaks above 10% to around 8-9% for qualified borrowers. While rates are still higher than the sub-5% levels of the pre-2020 era, they present opportunities for homeowners locked into loans from the inflation surge. 

Refinancing is generally worth exploring when you can reduce your rate by at least 0.75 to 1 percentage point. This threshold helps ensure your monthly payment savings will outpace the closing costs over a reasonable timeframe. 

You can refinance just the home equity loan by itself, keeping your existing mortgage untouched. Or, you can combine your first mortgage and equity loan into one loan through a cash-out refinance. A CrossCountry Mortgage loan officer can help you understand what you may personally qualify for based on your situation.

Life changes often prompt homeowners to review their existing home equity loan. Shifts in income, credit scores, home values or market rates can all make refinancing your home equity worth considering. 

Lowering a high interest rate. If you took out your original home equity loan during the 2022-2023 rate spike and your credit has improved since then, you may qualify for a significantly lower rate today. 

Reducing monthly payments. A lower interest rate or extended loan term can bring down your monthly payment, freeing up cash flow for other expenses. Just keep in mind that extending the term increases total interest paid over time. 

Accessing more equity. Rising home values since 2021 have given many homeowners additional equity. You can tap this for home improvements, education costs or major purchases. 

Converting from a variable-rate HELOC. If you currently have a home equity line with variable interest rates, switching to a fixed rate home equity loan provides predictable payments and protection from future rate increases. 

Shortening the term. Some homeowners refinance to a shorter repayment term, paying off the loan faster and reducing total interest paid even if the monthly payment increases. 

Consolidating high-interest debt. Folding credit card balances (often at 20%+ APR) into a lower-rate secured loan can save money on interest costs. However, debt consolidation with home equity means your home is now collateral for that debt. Missed payments could put your property at risk.

There are three main pathways to refinance: a new home equity loan, a HELOC or a cash-out refinance of your first mortgage. 

The right path depends on your financial goals, how much flexibility you need and how long you plan to stay in your home. The following sections walk through each method with pros, cons and when it tends to fit best. 

CrossCountry Mortgage can walk you through each structure and show side-by-side numbers to help you compare.

This option replaces your existing loan with a new fixed rate, lump sum loan. You’ll receive the full amount upfront and make fixed monthly payments over a set repayment period. 

When it works well: 

• Your credit score has improved and you qualify for a lower rate
• You want to adjust the loan term (shorter for faster payoff, longer for lower monthly cost)
• You prefer the predictability of fixed payments over a revolving credit line 

Example: Refinancing a $60,000 balance from 10% to 8% over 15 years drops the monthly payment from about $635 to $576. Total interest paid changes from roughly $64,300 to $43,800 in this illustration — though individual results will vary based on your loan terms and profile. 

Closing costs for a home equity loan refinance are often lower than a full mortgage refinance, typically 1-3% of the loan amount. You’ll want to compare your expected savings against these costs to see how long it takes to break even.

Refinancing into a HELOC converts your balance into a revolving credit line. Most HELOCs have a draw period (often 10 years) followed by a repayment period. 

Key features to consider: 

• Flexible borrowing. You can pay off your previous home equity loan and re-borrow later without submitting a new application. This suits homeowners with phased renovation plans or ongoing home improvement projects.
• Interest only payments during the draw period. This can lower your required monthly payment early on, though principal isn’t being paid down.
• Variable rates. HELOC rates are typically tied to a benchmark index. If market rates rise, your payments will increase. 

Some lenders, including CrossCountry Mortgage in certain programs, offer fixed-rate conversion options within a HELOC. This can provide flexibility during the draw period with the option to lock in a fixed rate later. 

If you choose a HELOC, make sure you’re comfortable with potential rate changes and have a budget buffer for 10-20% payment increases if rates climb.

A cash-out refinance replaces your current mortgage with a new mortgage for a larger loan amount. The new loan pays off both your existing mortgage and your home equity loan, leaving you with one loan and one monthly payment. 

When it can make sense: 

• Current first-mortgage rates aren’t dramatically higher than your existing rate
• You want to simplify to one payment and potentially access additional cash
• You need more money for renovations, education or other expenses 

Example: Say you have a $260,000 first mortgage at 3.25% and a $40,000 equity loan at 10%. A new $320,000 loan at 6.25% pays off both, giving you one payment instead of two. The blended rate may be higher than your old first-mortgage rate, but lower than your equity loan rate. 

Important consideration: If your current first mortgage has a very low rate from 2020-2021, replacing it may not be beneficial unless you have strong reasons like significant cash needs or heavy payment relief.

The refinancing process is similar to getting your original loan, but lenders focus on your current finances and home value rather than past conditions.

Approval depends on risk: lenders want to see enough equity, strong repayment ability and a solid payment history. 

Credit score: Most lenders require a minimum in the low-to-mid 600s, with the best rates typically available at 700 or higher. Requirements vary by lender and product. 

Combined loan-to-value ratio (CLTV): This measures your total mortgage debt divided by your home’s value. Many programs cap CLTV at 80-85%, though some allow higher ratios for borrowers with strong credit. Example: A $300,000 home with a $200,000 first mortgage and $40,000 equity loan has an 80% CLTV. 

Debt-to-income ratio (DTI): Calculate this by dividing your total monthly debt payments by your gross monthly income. Many lenders prefer 43% or lower, with some flexibility for strong overall profiles. 

Income and employment: Stable employment or consistent self-employment income is important. Be ready to document with recent pay stubs, W-2s or tax returns. 

Payment history: On-time payments on both your first mortgage and existing home equity loan strengthen your application. Missed payments in the past 12 months can hurt your approval odds. 

CrossCountry Mortgage offers a wide range of loan products, which may help borrowers find an option even if they don’t fit a “perfect” profile. Qualification guidelines can change, so verify current requirements with a licensed loan officer.

Refinancing involves tradeoffs. You may improve some aspects of your loan while taking on new costs or risks. 

Potential benefits: 

• Lower interest rate and reduced monthly payment
• Ability to adjust the loan term to match your financial goals
• Option to switch between variable and fixed rate structures
• Access to more equity for projects or strategic debt consolidation
• Simplified finances if combining multiple loans into one 

Potential drawbacks: 

• Closing costs (typically 2-5% of the loan amount) that may take years to recoup
• Risk of extending the term and increasing total interest paid, even with a lower rate
• More debt secured against your home, increasing foreclosure risk if income drops
• Possible loss of a very low first-mortgage rate if using a cash-out refinance

Refinancing isn’t the only option. Some borrowers may not qualify or may find the math doesn’t work in their favor. The following alternatives may help depending on your situation. 

Home equity loan modification 

A loan modification is a change to your existing loan’s terms, negotiated with your current lender, rather than a brand-new loan. 

Common modification tools include: 

• Adding missed payments to the end of the loan 

• Extending the repayment term to lower monthly payments 

• Temporarily or permanently reducing the interest rate 

Lenders typically require proof of hardship (job loss, medical costs, reduced income). Approval isn’t guaranteed, and modification can affect your credit. Contact your current lender early if you’re struggling — don’t wait until you’re far behind. 

Short-term relief: forbearance or repayment plans 

Forbearance is a temporary pause or reduction in payments, usually for a set period. Missed amounts are due later through a lump sum, payment plan or loan adjustment. 

Some lenders also offer structured repayment plans where you make slightly higher payments over time to catch up. Interest generally continues to accrue during forbearance, so understand how and when paused payments must be repaid. 

These options work best for short-term hardship — like a 3-6 month income disruption — when you expect to return to full employment. 

Other borrowing options beyond home equity 

If you need funds but don’t want to tap more home equity: 

• Personal loans: Fixed rate with no home collateral, suitable for smaller balances
• 0% APR balance transfer cards: Can work for short-term consolidation if you can pay off the balance within the promotional period
• Budget adjustments: Building an emergency fund can help avoid overleveraging your home 

These options often carry higher interest rates than home equity products, but they don’t put your home directly at risk. CrossCountry Mortgage focuses on mortgage-related solutions, but consider your full financial picture before adding more debt.

There’s no one-size-fits-all answer. The right choice depends on your goals, time horizon and comfort with risk. 

Questions to ask yourself: 

• Will I keep this home long enough to break even on closing costs?
• Is my main goal lower payments, faster payoff or extra cash—and does a refinance actually achieve that?
• Am I comfortable with the new total amount I’d owe against my home?
• How would my budget handle a future income drop or emergency with this new payment? 

Running scenarios with a loan officer and using calculators to compare your current loan versus proposed options can clarify the decision. 

If you’re unsure, talking with a CrossCountry Mortgage loan officer can help you understand your options without any obligation.