HELOC and refinancing! What happens?

Question

What happens to existing HELOC when u refinance? I'm thinking I should take advantage of the all time low rates but if I do will my HELOC have to be reapproved?

Michael Garofalo · Answer

@Heidi Smith you don't need to close your HELOC if you don't want to. You just need to get a subordination agreement prepared and signed by the bank who holds it. I refinanced my primary residence 1st mortgage a few months ago, but left the HELOC in place so I still have the revolving line of credit available to me and wouldn't be forced to re-apply for another HELOC (and thus deal with all the paperwork and headaches associated with that).

If I were you, I would go this route. I've heard a lot of banks are not offering HELOCs to customers at the moment given the economic turmoil caused by Covid. If you close it and think you can easily get it back, that might not prove to be the case.

Chris Teti · Answer

I had the same as @Kerry Baird. HELOC was closed, home refinanced, and then I had to re-apply for the HELOC again. Worked out better actually b/c the house was worth more so I got a bigger HELOC.

Kerry Baird · Answer

My lender required me to close the HELOC when we refinanced.  Once the first mortgage is paid off, the HELOC goes into first position, and the "regular" mortgage will by necessity be in second position.  They won't do that.  In my case, we would have had to apply for the HELOC again...hated the extra pull on credit, so we didn't do that.

J. Mitchell Bernier · Answer

@Heidi Smith so if your just wanting to refinance the balance of the 112k then your Heloc should stay, as long as the bank who has the is ok with it being a 2nd lien position. If the same bank has both loans then it won’t be a problem at all. Just talk with your local lender, but you should have enough equity to keep the HELOC open.

Hope that helps,

Good Luck!

Heidi Smith · Answer

@J. Mitchell Bernier I currently have a HELOC for 40k... Haven't touched it ( had plans dreams etc but Corona has messed that up for the moment) so I have my primary sfh total principal is around 112k. Current value of house around 220k. Current interest rate is 4.25. So if I refi my question is does the HELOC go away or do I have to get approved all over again?

J. Mitchell Bernier · Answer

So if you are talking about refinancing the balance on the HELOC, then in most cases it will go away. For example, let say you have a house that is work 100k and you have a heloc for 75k. After the refinance you will have a loan for 75k with no HELOC anymore.

If by chance you have a lot more equity, some places will allow you to move your HELOC to the 2nd position but your rate will go up of course. Same example as above except your Heloc balance is 30k so you keep a 45k Heloc as a 2nd lien.

Good Luck!

Julio Garcia · Answer

I suggest you get in touch with your Lender that approved the heloc.

(Generic answer but i'm not sure)