Home Equity · 8 min read
How to Refinance a HELOC in California: Your 4 Options
You can refinance a HELOC four ways: open a new HELOC that pays off the old one, switch to a fixed-rate home equity loan, fold the balance into a cash-out refinance of your first mortgage, or ask your current lender to fix part of the balance. The right choice depends mostly on one number: the rate on your first mortgage. If it is low, keep it and refinance only the HELOC.
Why people refinance a HELOC
Most HELOCs have two phases. During the draw period, usually about 10 years, you can borrow and often pay interest only. When it ends, the repayment period starts, usually about 20 years, and you pay principal and interest on whatever you owe. Borrowers usually look at a refinance for one of three reasons:
- The draw period is ending and the payment is about to jump.
- The rate is variable and has risen with the prime rate, and you want a fixed payment.
- You need more room, because your home has gained value and you want a larger line or a lump sum.
A real payment-shock example
Say you owe $100,000 on a HELOC at 8%. During the draw period, interest only costs about $667 a month. When repayment starts, that same balance paid over 20 years at 8% costs about $836 a month, roughly $170 more, and more if the rate rises. Planning the refinance before the draw period ends gives you time to compare options instead of reacting to the new bill.
These figures are an illustration of the math, not a quote. Your own numbers depend on your balance, rate and term. Our HELOC calculator shows yours.
Option 1: A new HELOC that pays off the old one
A new HELOC with another lender pays off the current one and starts a fresh draw period. It works well when you still want flexible access to cash and your income and equity qualify. Most California programs lend up to about 80–90% combined loan-to-value (your first mortgage plus the new line), and a credit score around 680 or higher opens the widest choice of lenders. The rate is usually still variable, so this option buys time and flexibility rather than certainty.
Option 2: A fixed-rate home equity loan (HELOAN)
A home equity loan replaces the line with a fixed rate and a fixed payment for a set term, often 10 to 30 years. If what worries you is rising rates or an interest-only payment ending, this is usually the cleanest fix. You lose the ability to re-borrow, but you know exactly what you will pay every month. See home equity loans and HELOAN vs HELOC.
Option 3: Fold the HELOC into a cash-out refinance
A cash-out refinance replaces your first mortgage with a new, larger one that also pays off the HELOC, leaving you with one loan and one payment. This only makes sense when the new first-mortgage rate is close to or lower than your current one. If you locked a low first-mortgage rate in recent years, a cash-out refinance would move your whole balance to today’s rate, which usually costs far more than it saves. That is why we typically recommend refinancing just the HELOC (options 1 or 2) and leaving a low first mortgage alone.
Option 4: Ask your current lender about a fixed-rate lock
Some HELOC lenders let you convert part of the balance to a fixed rate, or will extend or modify the line. It is worth one phone call before you apply elsewhere, because it can avoid closing costs and a new appraisal. Compare the fixed rate they offer against options 1 and 2 before you accept.
Which option fits you
| Your situation | Usually the best fit |
|---|---|
| Low first-mortgage rate, want a predictable payment | Fixed-rate home equity loan |
| Low first-mortgage rate, still need flexible access to cash | New HELOC |
| First-mortgage rate is high or similar to today’s rates | Cash-out refinance (one loan) |
| Small balance, lender offers a good fixed-rate lock | Convert with your current lender |
| Self-employed, tax returns show low income | Bank statement HELOC or home equity loan |
Refinancing a HELOC when you are self-employed
Many HELOC lenders still want two years of tax returns, which can be a problem if your write-offs lower your taxable income. Non-QM lenders offer HELOCs and home equity loans that qualify you on 12–24 months of bank statements, a CPA-prepared P&L, or assets instead. See bank statement HELOCs and non-QM HELOC options.
What the process looks like
- Check your numbers: current balance, rate, when the draw period ends, and your first-mortgage rate.
- Estimate your equity: most programs cap combined borrowing at about 80–90% of the home’s value.
- Compare options side by side: monthly payment, total interest, closing costs and flexibility.
- Apply and appraise: expect income documents and an appraisal or automated valuation.
- Close: standalone HELOCs and home equity loans typically fund in about 2–4 weeks.
As an independent mortgage broker, Save Financial compares HELOCs, home equity loans and cash-out refinances across 20+ lenders, so you see every option for your situation, not just one lender’s product.
About this article: Save Financial is a California-licensed independent mortgage brokerage (NMLS #377740, DRE #01875766) with offices in Newport Beach and Marina del Rey, serving all 58 counties. We shop 20+ wholesale lenders to match you with the right program. This article is general education, not a loan offer or commitment to lend. For a real quote, apply online or call 949-379-5320.