Can You Refinance a Home Equity Loan Without Refinancing Your Mortgage?

Yes, you can you refinance a home equity loan or home equity line of credit (HELOC) without refinancing your mortgage

A home equity loan or second mortgage lets you tap into your home’s equity for things like renovations, debt consolidation, or other major expenses. But like your primary mortgage, second mortgage rates can change over time. So if you have an opportunity to get a lower rate, switch to fixed payments, or improve your terms, refinancing can help you save.

In this article (Skip to...)

• Option 1: Stand-alone second mortgage refinance
• Option 2: Convert HELOC to fixed-rate second mortgage
• Option 3: Blend-and-extend with your first mortgage

Why refinance a home equity loan separately?

Some people will refinance their main mortgage and roll their home equity loan into the new loan. But while convenient, it’s not always the best move, especially when your first mortgage already has a low interest rate and you might benefit more from one of several refinance alternatives.

If you have a low fixed rate on your primary mortgage, refinancing the entire mortgage simply to address your home equity loan could result in losing a great rate and paying more in the long run. This is why refinancing a home equity loan separately makes sense in some cases.

It allows you to keep the low rate on your original mortgage while still improving the terms of your second loan.

Reasons to consider refinancing a second mortgage vary. Take HELOCs, for example. These typically have variable interest rates, in which case your payment can rise over time. And even with home equity loans, which often have fixed rates, current rates may be lower than when you first borrowed.

For that reason, converting a HELOC to a predictable fixed-rate home equity loan or refinancing a current home equity loan for a lower rate, could potentially save money.

Additionally, only refinancing a home equity loan means that you avoid resetting the clock on your main loan or adding more interest over time.

Option 1: Stand-alone second mortgage refinance

One of the most straightforward ways to refinance a home equity loan is to take out a new second mortgage to pay off the old one. This is referred to as a stand-alone second mortgage refinance. You can do this with your current lender or shop around with a new one to find better terms.

Since you’re starting over with an entirely new loan, you’ll need to go through the full application process again, just like when you first got the loan.

This includes verifying your income, checking your credit, and possibly getting a home appraisal, depending on the lender’s requirements.

One key benefit of a stand-alone refinancing is keeping your primary mortgage exactly as it is. But since you’re creating a brand new second mortgage, you’ll also need to account for closing costs.

These can vary, so compare lenders, rates, and fees to see which option gives you the best deal.

Option 2: Convert HELOC to fixed-rate second mortgage

Another difference between a HELOC and a home equity loan is how the interest rate works.

Home equity loans typically have a fixed interest rate and fixed monthly payments. HELOCs, on the other hand, usually have variable rates, which means your interest rate and payment can rise or fall over time.

If you’re concerned about rising rates, you can refinance the outstanding balance on your HELOC into a fixed-rate home equity loan. This type of refinance streamlines your finances because you’re converting your remaining HELOC balance into a more predictable, traditional second mortgage with steady monthly payments. This can make budgeting easier.

If considering this route, contact your lender and ask for a conversion quote. This outlines your new loan terms and provides an idea of how much you’ll pay over time. Carefully review all details, including closing costs, repayment terms, and any fees to avoid surprises.

Option 3: Blend-and-extend with your first mortgage

While some homeowners might refinance their second mortgage separately, there’s another option: combining your first and second mortgages into one new loan. This is called a cash-out or full refinance.

Instead of having two separate loans with two separate payments, you’d have a single mortgage with one interest rate and one monthly payment.

This option is only available if you’re open to refinancing your primary mortgage along with your second. It’s something to consider if your first mortgage has a higher interest rate and there’s an opportunity to lock in something lower.

Maybe interest rates have dropped since you originally bought your home, or your credit score has improved, allowing you to qualify for better terms.

By rolling both loans into one and lowering the overall rate, you could reduce your total monthly payment and potentially free up cash for other financial goals.

Steps to get started

Once you’ve decided on a refinancing option, here’s how to move forward:

Review your current loan terms. Take a close look at your existing HELOC or home equity loan. What’s your current interest rate? Is it fixed or variable? Is there a prepayment penalty? And how much do you owe? Knowing these details can help you compare new offers.

Shop around and compare lenders. While you can refinance with your current lender, they may not offer the most competitive terms. Getting just one additional rate quote could save homebuyers an average of $1,500 over the life of the loan.

Gather your paperwork. Be prepared to provide proof of income, recent pay stubs, and details about your financial history. Your credit will be checked, and in most cases, your home will need an appraisal.

Review and compare loan offers. Once you’ve received a few quotes, go through each one carefully. Look at the interest rate, monthly payment, loan term, and closing costs. The goal is to choose the loan that saves you the most money over time, both in interest and fees.

Lock in your rate and close the deal. After selecting the best offer, you’ll lock in your rate, schedule your closing, and officially refinance your second mortgage. From there, you can start enjoying the benefits of a more manageable loan.

You can you refinance a home equity loan without refinancing your mortgage

You don’t have to touch your first mortgage to improve your second. Whether you’re refinancing a home equity loan or converting a HELOC to a fixed-rate loan, a standalone refinance might give you better terms and more predictable payments.

Start by shopping around and comparing lenders, reviewing the numbers, and thinking about your financial goals. Discuss options with your mortgage expert to figure out which one makes the most sense for your situation.