Gonna be honest – I had a home equity loan for four years and didn’t even know refinancing it was possible. Though I was stuck with whatever rate I got. Turns out I was wrong and could’ve been saving money this whole time. Learning about can you refinance a home equity loan changed my whole financial situation.
Got my home equity loan back in 2020. Needed $58,000 to add a garage and do some other work on the house. The rate was 9.4% which seemed high but the bank lady said that’s normal for home equity loans. I didn’t question it. Just signed the papers and got the money.
Monthly payment was $615 for 12 years. Not fun but we managed. Been paying it for four years when my cousin mentioned he refinanced his home equity loan. I was like wait, you can do that? He looked at me like I was stupid. Said yeah, obviously, it’s just a loan like any other loan.
That conversation happened at a family barbecue last summer. Went home that night and started Googling. Found out yes, can you refinance a home equity loan is totally a thing. I felt pretty dumb for not knowing sooner.
Why I Thought You Couldn’t Refinance
Looking back, I have no idea why I thought home equity loans were different from other loans. In my head, I guess I figured you get a home equity loan, you pay it off over the years, that’s it. Never occurred to me you could refinance it for a better rate.
When I got my car loan refinanced three years ago, I didn’t think twice about it. Saw a better rate, called the lender, got it done. But somehow with the home equity loan, my brain just didn’t make that connection.
My wife said she thought you could refinance them but wasn’t sure. Never brought it up because she figured I knew what I was doing. Yeah, I definitely didn’t know what I was doing.
Cost us probably $8,000 or $9,000 by not refinancing sooner. That hurts to think about. All because I didn’t ask a simple question – can you refinance a home equity loan?
Started Calling Lenders After That Barbecue
Monday after the barbecue, I called three different lenders. Told each one I had a home equity loan at 9.4% and wanted to know if I could refinance it. All three said yes immediately. Like it wasn’t even a question.
The first lender offered 7.2%. The second one offered 7.6%. The third one – a credit union my coworker recommended – offered 6.9%. That last one would drop my payment from $615 to $520 monthly. That’s $95 a month back in my pocket.
Asked the credit union lady why my original rate was so high. She said 9.4% isn’t a crazy high for 2020 but it’s definitely on the higher end. Either my credit wasn’t great back then or I just got a bad deal by not shopping around.
The Process Was Pretty Easy
Thought refinancing would be complicated. Really wasn’t. Way easier than getting the original loan honestly.
Had to provide recent pay stubs, tax returns from last year, bank statements. They pulled my credit report. Needed proof of homeowners insurance. That was basically it.
They did a new appraisal on the house. Guy came out, looked around for maybe 45 minutes, took pictures. House appraised at $428,000. We bought it for $295,000 in 2016, so that was nice to see. Meant we had plenty of equity for them to feel comfortable with the loan.
Whole thing took about five weeks from application to closing. Closing itself took like 30 minutes. Signed papers, new loan paid off the old one automatically. Started making new lower payments next month.
Honestly wished I’d looked into whether can you refinance a home equity loan years ago. Could’ve been saving money this whole time.
My Cousin’s Story Was Even Better
Talked to my cousin more about his refinance. He’d gotten his home equity loan at 11.2% back in 2019. Terrible rate. Refinanced it last year down to 7.4%. His payment dropped from $680 to $495. That’s $185 a month savings.
Asked him why he waited so long to refinance. He said he didn’t know he could either until someone at work mentioned it. We both just assumed home equity loans were fixed and you couldn’t change them. Both of us were wrong.
What I Learned About Refinancing Home Equity Loans
After going through this, I did way more research than I should’ve done before getting the original loan. Here’s what I learned about can you refinance a home equity loan:
Yes, you can always refinance a home equity loan. There’s no rule saying you can’t. It’s just a loan secured by your house. Any loan can be refinanced if you find a lender willing to do it.
Most lenders want you to wait at least six months after getting the original loan. Some want a year. But after that waiting period, you’re free to refinance whenever you want.
You can refinance with your original lender or a different one. Doesn’t matter. Shop around to find the best rate.
When Refinancing Makes Sense
Talking to the credit union loan officer, she explained when it makes sense to refinance a home equity loan. She said generally you want at least a 1.5% rate drop to make it worth the closing costs and hassle.
I was dropping from 9.4% to 6.9% – that’s 2.5%. Definitely worth it. If I was only dropping to 8.9%, probably not worth paying $2,100 in closing costs for 0.5% savings.
She also said it depends on how long you’re keeping the loan. If you’re planning to pay it off in the next year anyway, refinancing doesn’t make sense. But I had eight years left, so plenty of time to recoup the closing costs and save money.
The question can you refinance a home equity loan has a simple yes answer. But whether you should refinance depends on your specific numbers.
What I’m Doing Differently Now
Now that I know I can refinance basically any loan, I’m way more proactive about checking rates. Got a car loan at 6.8% right now. Planning to call around in a few months and see if I can get that down too.
Also, I’m not just accepting whatever rate a lender first offers anymore. When I got that 9.4% home equity loan in 2020, I only talked to one lender – my bank. Should’ve called at least three places and compared rates. Would’ve probably found something better than 9.4%.
My Advice If You Have a Home Equity Loan
If you’ve got a home equity loan, check when you got it and what your rate is. If it’s been a few years and rates have changed, look into refinancing. The answer to can you refinance a home equity loan is yes, so at least get some quotes and see what you could save.
Don’t assume you’re stuck with your current rate like I did. You’re not. You can refinance anytime after the initial waiting period.
Call at least three lenders. My rates ranged from 7.6% to 6.9%. That difference matters over eight years. Don’t just go with your current lender without shopping around.
Check your credit score before applying. If it’s gone up since your original loan, you’ll probably qualify for better rates. If it’s gone down, you might want to work on improving it before refinancing.
Where Things Are Now
Been in my refinanced home equity loan for about six months. Saving $95 a month feels really good. That money goes into our emergency fund now.
Already made back about $570 of the $2,100 closing costs. Should break even completely in another 16 months. After that, it’s pure savings every month for the rest of the loan.
Still annoyed at myself for not knowing sooner that can you refinance a home equity loan was even possible. But at least I know now and I’m saving money going forward.