Good Reasons to Refinance a Home Equity Loan

3 minutes read

Have you ever thought of refinancing your home equity loan? It’s not a common practice, but it can definitely have some benefits. Because your home equity loan might change over time, you may want to reevaluate your situation to see if you should consider refinancing your home equity loan.

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Keep reading to learn the top reasons you may want to think about refinancing.


If you have an adjustable rate loan, you may want something more secure. If waiting on pins and needles to see what your interest rate will be month to month is too much to handle, the fixed rate loan may be beneficial for you.

Before you refinance, make sure you understand the terms. Again, are you adding time onto your loan? If so, you may want to reconsider as it means more years of interest payments. If you can get a similar or lower term and a fixed interest rate though, it may help you in the long run.

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If interest rates dropped since you took out your home equity loan, you may want to refinance it. Since there are often fewer closing costs with a home equity loan, it won’t cost you as much to refinance. This means you won’t have to worry as much about your break-even point. You can refinance and know that you’ll recoup the costs quickly.

Before you assume you’ll get a lower payment, think of the big picture here. If you refinance, how much will you borrow? Will you be extending your loan or shortening the term? A lower payment isn’t always the answer if it means you are extending your term several years. That just means you’ll pay more interest over the life of the loan.

If you can get that lower payment and keep your term the same, though, it may be well worth it.


While it’s not ideal, sometimes you just need more money. If you have the equity in your home and the ability to tap into it with a home equity loan, it may be worth it. Consider what you’ll use the funds for and what plans you had for your home. Is the equity in your home your retirement plan? If so, you may want to leave it untapped. If it’s not your retirement plan, though, you may want to enjoy using the money while you can enjoy it.


As we’ve discussed several times here, the longer you borrow money, the more interest you’ll pay. If you know that you can refinance your home equity loan and shorten the term, you may save yourself some money. Even if you have to take a slightly higher interest rate, the fact that you’ll pay the interest over a shorter period is important.

If you look at the big picture, you’ll be able to tell what choice is right for your home equity loan. If you have a great interest rate and short term, you have the best of all worlds and shouldn’t touch your home equity loan. If you have a higher than average interest rate, loan term, or adjustable rate, though, you may want to consider refinancing your home equity loan into a long with better terms for you.

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