Refinance a HELOC? Compare the Costs and Options

This calculator estimates the monthly payment and total interest for a fixed-rate loan that could be used to pay off a home equity line of credit (HELOC). Enter the amount to refinance, the new loan’s APR, and its term to compare the estimate with your HELOC’s actual terms from your lender.

Formula

The calculator applies the standard fixed-payment loan formula. It estimates the monthly payment as Payment = P × r ÷ [1 − (1 + r)⁻ⁿ], rounded to the nearest cent. Total interest is estimated as Payment × n − P.

• P is the amount borrowed to pay off the HELOC, in dollars.
• r is the monthly interest rate, calculated as APR ÷ 1,200.
• n is the number of monthly payments, calculated as loan term in years × 12.

The APR is entered as a percentage per year. The formula assumes the same rate and a level payment throughout the term. It does not calculate a HELOC’s changing balance or variable interest rate.

Worked Example

Using the default inputs—$20,000, an 8% APR, and five years—the monthly rate is 8 ÷ 1,200 = 0.0066667, and the term is 5 × 12 = 60 payments.

Payment = 20,000 × 0.0066667 ÷ [1 − (1 + 0.0066667)⁻⁶⁰] = $405.53 per month, rounded to cents. Total interest = $405.53 × 60 − $20,000 = $4,331.80.

Assumptions

• The refinanced loan has a fixed APR and equal monthly payments.
• Payments are made monthly at the end of each period.
• Interest compounds monthly at APR ÷ 12.
• Fees, closing costs, taxes, insurance, PMI, escrow, and any HELOC charges are not included.

What It Means to Refinance a HELOC

A HELOC is a revolving line secured by a home. You can generally borrow, repay, and borrow again under the line’s terms, up to its available limit. Its rate may vary, and the payment can change as the balance, rate, or repayment phase changes. Refinancing means replacing or restructuring that debt, rather than simply continuing to use the existing line.

One possible approach is a new fixed-rate home equity loan or another mortgage loan whose proceeds pay off the HELOC. Another is replacing the current line with a new HELOC, which may retain a variable rate and revolving access. The calculator models only a new fixed-rate, fully amortizing loan; it cannot predict future HELOC payments or decide whether a replacement fits a particular situation.

How to Compare the Options

Start with the current payoff amount, not just the original amount borrowed. Ask the HELOC servicer for a payoff figure and details of the current rate, payment calculation, remaining draw period, repayment period, and any charges that apply. Then obtain the proposed loan’s written terms, including its APR, term, payment schedule, and itemized costs. Use the payoff amount as the calculator’s principal only if the new borrowing will cover that amount; include financed costs only when they are actually part of the new loan balance.

• Compare the payment: A longer term can lower the scheduled monthly payment while increasing the number of payments and potentially the total interest.
• Compare total cost: The calculator’s total interest is not the whole cost. Add applicable upfront and ongoing charges separately, and account for any costs paid from savings rather than financed.
• Compare flexibility: A closed-end loan generally does not provide the same ability to draw funds again as an open HELOC. A new line may have a different rate structure and access terms.
• Check the collateral: HELOC borrowing is secured by the home. Replacing it with another home-secured loan still puts the home at risk if required payments are not made.

For example, refinancing a $20,000 balance over five years at the calculator’s 8% example APR gives an estimated payment of $405.53 and interest of $4,331.80 before excluded costs. A different term changes both figures. This is an illustration, not a quote or a statement about available rates.

Costs, Timing, and Common Pitfalls

Refinancing can involve costs such as application, valuation, title, or closing charges, depending on the product and transaction. The lender’s itemized disclosures are the source for actual charges. A lower quoted payment alone does not establish that the total cost is lower: a longer payoff period can spread payments out and add interest, and upfront costs may offset savings. Conversely, a shorter term can raise the monthly payment while reducing the time debt remains outstanding.

Check whether the HELOC balance is still changing while a replacement is arranged. New draws, accrued interest, and the final payoff amount can affect how much must be borrowed. Confirm how the old line will be paid and whether it will remain open, be closed, or be subject to other terms; do not assume the new lender handles every detail without confirmation.

A common misconception is that refinancing automatically converts a variable-rate HELOC into a fixed rate. That depends on the replacement product: a new HELOC can also have a variable rate, while a fixed-rate loan may have different access and repayment features. Another mistake is treating the calculator’s “total interest” as a complete cost comparison. It excludes fees and does not model changes to the existing HELOC.

Frequently Asked Questions

Can I refinance a HELOC into a fixed-rate loan?
Some loan products may allow a HELOC balance to be paid off with a fixed-rate loan. Product availability and terms vary; review the proposed loan documents and costs with the lender.

Can I refinance a HELOC into another HELOC?
A new line may be an option, subject to the lender’s terms. Compare its rate structure, repayment schedule, fees, draw access, and other conditions with the existing line.

Does refinancing a HELOC change the payment?
It can. The payment depends on the new balance, APR, repayment structure, and term. This calculator estimates an equal monthly payment for a fixed-rate loan, not a variable-rate HELOC payment.

Does the calculator include closing costs?
No. It estimates principal-and-interest payments from the inputs only. Check the lender’s written disclosures for fees and determine whether any costs are paid upfront or added to the new balance.

Is a lower monthly payment always a lower-cost option?
No. A longer term can reduce the scheduled payment but require more payments and increase total interest. Compare the complete payment schedule and applicable costs, not just the monthly figure.

This result is an estimate; the lender’s disclosure gives the exact figures.

Related

• Second Home Equity Line of Credit: Costs and Risks
• Figure Home Equity Line of Credit Calculator
• Five-Year HELOC Payment Calculator and Guide

in p | Loan amount | $ | 20000 | 1 | 100000000
in apr | Interest rate (APR) | % | 8 | 0.01 | 100
in yrs | Loan term | years | 5 | 0.0833 | 50
out pmt | Monthly payment | $ | p * (apr / 1200) / (1 - (1 + apr / 1200) ^ -(yrs * 12)) | 2
out int | Total interest | $ | pmt * yrs * 12 - p | 2