How to Convert a Home Equity Line of Credit

Home Equity Lines of Credit, or HELOCs, are mortgages that consumers use to avoid refinancing. The purpose of these loans is often for home improvements, but they can also be used for debt consolidation, straight cash-out and large expenses. Some HELOCs have provisions that allow customers to change the structure of their revolving equity lines and convert them to fixed-rate, closed-end accounts.

Existing HELOC

Step 1

Collect your HELOC mortgage paperwork. When you closed the loan, your lender should have given you a large package of information that contains all the terms related to your HELOC.

Step 2

Review the paperwork and look specifically for the "Loan Agreement." This agreement spells out the amount financed, the term of the loan (when it will expire), the revolving nature of the account and the interest rate. Many HELOCs have variable interest rates.

Step 3

Look for a clause in the loan agreement that refers to Conversion. In most cases, conversion is allowed on HELOCs only after a predetermined period of time. Look carefully and see if you qualify for a conversion.

Step 4

Call your lender to convert your HELOC to a fixed-interest, closed-end installment account if your loan is eligible. This will be a simple process, but you may need to go into an office and sign another loan agreement confirming the change.

Refinancing

Step 1

Seek refinance options if your HELOC is not eligible for a conversion. Some lenders do not place this provision in their loan agreements, and you will be stuck with the HELOC if you do not refinance.

Step 2

Speak with your current HELOC lender about a refinance conversion. It may be possible to do a simple refinance or rate modification since you are a current customer. They'll also like to retain your business.

Step 3

Make sure any refinance does not add any additional money to your principal (unless you seek more cash), cost exorbitant fees and put you in a riskier financial situation (e.g. a higher payment).

Step 4

Refinance your HELOC into a closed-end, fixed interest mortgage.