Refinance a Home Equity Loan into a Mortgage

Can I refinance a home equity loan into a mortgage?

9 Answers

Yes you can, If you have enough equity in your property and can qualify for a mortgage that will pay off your 1st and 2nd mortgage (Home Equity line).

It gets tricky if you have used the line in the past 12 months, underwriting guidelines usually call this a cash out refinance even if you are refinancing the 2nd (Home Equity line).

This is due to them thinking you have taken cash out if you have used it in the past 12 months. So they will count that as a cash out transaction which limits the amount that can be borrowed due to risk factors versus one that has not been touched in the past 12 months, which would be considered a rate and term refinance which is much more favorable to the lender.

You should speak with your loan consultant so they can go over this with you, or feel free to contact me and I will let you know if you can do it or not.

The short answer is yes, however it depends on the amount of equity left in your home when all is said and done.  Currently conventional financing only allows for cash out of to 80% of your home's value.  Rolling a home equity loan into your mortgage is considered cash out.  Your other option is FHA.  With FHA you are capped at 85% loan to value however if you can prove that you have not drawn on your home equity line or at least not in excess of 1K in the last year you will be capped at 97.75% loan to value ratio.  OF course we do not know the value of your home unless it has been recently appraised.  I do not do VA loans but that might be an option if it is available to you.  With VA I am not sure what the requirements are on combining the two loans.

Yes you can but you need to find out what your loan to value will be when you combine the two as banks are limiting the amount they will loan on a cash out refinance.

You maybe asking; I'm not taking cashout.  In the eyes of the banks your 2nd is cashout because you took a 2nd mortgage out on your home's equity (like drawing on your credit card limit) and now you want to combine that cash you took out into a new securitized first mortgage.  The equity in that home is reduced and will take longer to pay off combining it into a longer term mortgage.  They look at your home equity line in someways like a credit card debt thus you are combining your cash debt (cash out of your home) into a first mortgage.  

Banks also look at cash out refinances as a higher risk.  Borrower is leveraging even more of their home thus reducing the amount of equity available.  Putting the bank at risk if there is a foreclosure or short sale as the equity has been reduced because of the cash out thus leaving the bank and it's investors with a nonperforming investment.

Most banks will not allow a cash out refinance beyond 85% of the value of the home. 

Check with a professional on what is the best solution for you.


In theory, sure.

My question would be, though, is what are you trying to accomplish?

If you have a second loan or line of credit with an adjustable rate and you are looking to fix the rate and begin making regular payments, you may be able to speak to your lender and modify the loan you have by fixing the rate and establishing a fixed payoff schedule. This may be much less expensive than a new loan. If the lender is not willing or able to do this, another lender may consider refinancing the debt into a new second mortgage.

If you are looking to consolidate your current loans (such as a first mortgage and a home equity loan) into one mortgage, a number of lenders would look at doing this for you. They would determine the value of the property, whether or not the equity loan was taken at the same time as the first loan or as "cash out" after the fact, how often the line or loan has been used, the value of your home, your credit, etc . . . just as though you were refinancing your first loan and also paying off other debt.

If you are looking to obtain access to your equity as "cash out" by replacing the home equity loan with a larger loan, you might try approaching both the existing lender and several others in your area to determine your options.

As with any mortgage, a good new (or existing) lender will consider carefully your income, assets, the value of your home, whether or not you live in the property, your credit and payment histories, etc. and determine what mortgage products would be available to you.

I think you can do it, this can be possible if you really have enough equity in your property and can qualify for a mortgage that will pay off all of your mortgage (Home Equity line).

Every refinance is possible but the thing is that you need to have a good credit score and in your situation its must. Going to refinance your home equity loan into mortgage is a good idea but it would be requiring a good equity on your home just to provide you with cash out amount that’s been required. So good to make a search in the market as you may find many lenders but you have to opt the one which is best suited with your conditions and is legit.

Yes remortgage loan is a good option for refinancing. A remortgage loan is the method of just paying off your one mortgage loan with the profits from another fresh mortgage loan using the same property which you have as security.

According to me it is possible; even it is a convenient option for any borrower to refinance a mortgage loan. If you are having good credit history then you can easily get this loan, but if you don’t have good credit history then you cannot get this loan. There are some more eligibility criteria for this loan which you must meet.

Yes, you can refinance it. But, it is still advisable that you take the advice of a professional before taking any action.