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Key Takeaways
- You can consolidate your HELOC and first mortgage into a single loan through a cash-out refinance, which pays off both debts and leaves you with one monthly payment.
- Consolidation works best when your HELOC’s variable rate is climbing, you want payment simplicity, and current mortgage rates are favorable enough to justify closing costs.
- To qualify, you’ll typically need at least 20% home equity, a credit score of 620 or higher, and a debt-to-income ratio below 43%.
Check your HELOC eligibility. Start here
Managing two separate home loans with different rates, terms, and due dates can feel like unnecessary financial juggling. If your HELOC’s variable rate has been climbing or you’re dreading the payment shock that comes when the draw period ends, combining both loans into one might offer some relief.
A cash-out refinance lets you roll your HELOC and first mortgage into a single, fixed-rate loan with one predictable monthly payment. Below, you’ll learn when consolidation makes sense, how to qualify, what it costs, and what alternatives exist if refinancing isn’t the right fit.
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What it means to consolidate a HELOC and first mortgage
Yes, you can combine your HELOC and first mortgage into one loan. The most common way to do this is through a cash-out refinance, which creates a new, single primary mortgage that pays off both existing loans at once.
Here’s how the process works. You apply for a new mortgage large enough to cover your current mortgage balance plus whatever you owe on your HELOC. The lender uses the loan proceeds to pay off both debts, and you walk away with just one loan and one monthly payment.
Most lenders cap cash-out refinances at 80% of your home’s appraised value. So if your home is worth $400,000, your new loan typically can’t exceed $320,000. You’ll also pay closing costs, usually between 2% and 5% of the new loan amount.
When consolidating your HELOC and mortgage makes sense
Consolidation isn’t the right move for everyone. But in certain situations, rolling your HELOC and mortgage together can save you money and simplify your finances.
Your HELOC rate has climbed. HELOCs typically carry variable interest rates tied to the prime rate. If your rate has jumped from 7% to 10% over the past couple years, locking in a fixed rate through a new mortgage can protect you from future increases and lower your monthly payment.
You’re entering the repayment period. Most HELOCs have a 10-year draw period where you can borrow and make interest-only payments. After that, you enter the repayment period and start paying back principal plus interest. This transition often causes “payment shock” because your monthly bill can jump significantly. Refinancing spreads the balance over a new loan term, which can ease that burden.
You want one predictable payment. Juggling two loans with different rates, terms, and due dates gets complicated. Consolidating gives you a single fixed payment each month, which makes budgeting easier.
You plan to stay in your home long-term. Refinancing comes with closing costs. If you’re planning to move in a year or two, you probably won’t recoup those expenses through monthly savings.
How to refinance your mortgage and HELOC together
You have a few different paths to combine your first mortgage and HELOC. The right approach depends on your equity position, your current mortgage rate, and what you’re trying to accomplish.
1. Use a cash-out refinance to pay off both loans
This is the most straightforward method. You apply for a new mortgage that’s larger than your current mortgage balance, and the extra funds pay off your HELOC in full.
Let’s say you owe $200,000 on your mortgage and $50,000 on your HELOC. You’d apply for a new mortgage of at least $250,000. The lender pays off both existing loans, and you’re left with one new mortgage.
Keep in mind that most lenders limit cash-out refinances to 80% of your home’s value. If your home appraises at $300,000, your new loan can’t exceed $240,000 in most cases.
2. Refinance your first mortgage and pay off the HELOC separately
If your HELOC balance is relatively small, you might do a standard rate-and-term refinance on just your first mortgage. Then you can use savings or other funds to pay off the HELOC on your own.
This approach works well when you don’t have enough equity to meet the combined loan-to-value limits of a cash-out refinance. It also lets you shop for the best mortgage rate without worrying about the HELOC balance affecting your options.
3. Negotiate new terms with your current lender
Before starting a full refinance application, it’s worth calling your existing lender. Some banks offer loan modifications or restructuring options that let you combine debts or adjust your HELOC terms without going through a complete refinance.
You might be able to convert your HELOC to a fixed rate, extend the draw period, or negotiate a lower rate. Not every lender offers these options, but asking costs nothing.
4. Replace your HELOC with a home equity loan
What if your first mortgage already has a great rate you don’t want to give up? In that case, you can keep your mortgage separate and apply for a fixed-rate home equity loan to pay off your variable-rate HELOC.
A home equity loan gives you a lump sum at a fixed rate, which you use to pay off the HELOC balance. You’ll still have two loans, but both will have predictable fixed payments instead of one variable-rate line of credit.
Requirements to qualify for HELOC and mortgage consolidation
Don’t assume you’ll automatically qualify just because you were approved for your original loans. Lenders evaluate your entire financial profile fresh when you apply for a refinance.
Here’s what most lenders look for:
- Credit score: A minimum of 620 for most programs, though scores in the 700s get better rates
- Loan-to-value (LTV) ratio: Your new loan balance divided by your home’s value typically can’t exceed 80% for a cash-out refinance
- Debt-to-income (DTI) ratio: Your total monthly debt payments divided by gross monthly income generally stays below 43%, though some programs allow up to 50%
- Home equity: Enough equity to cover both existing loan balances plus closing costs while staying within LTV limits
- Stable income: Pay stubs, W-2s, and tax returns to verify your earnings
If you’re on the edge of qualifying, some lenders offer more flexible guidelines. Shopping around with multiple lenders can help you find one that fits your situation.
See what HELOC rates you qualify for today
Compare home equity lenders now. Start here
Costs of consolidating your home equity line and mortgage
Refinancing isn’t free. Understanding the expenses upfront helps you figure out whether consolidation actually makes financial sense.
Typical closing costs and fees
Closing costs for a cash-out refinance look similar to what you paid when you bought your home. Expect to pay between 2% and 5% of the new loan amount.
Common fees include:
That last one is important. Check your HELOC documents before you start the process. Some HELOCs charge a penalty if you pay them off within the first few years.
How to calculate your break-even point
Your break-even point tells you how long it takes for monthly savings to offset closing costs. The math is simple:
Total Closing Costs ÷ Monthly Savings = Months to Break Even
For example, if closing costs total $6,000 and you save $200 per month, you’d need 30 months to break even. If you’re planning to sell before that point, consolidation probably doesn’t make sense.
Pros and cons of combining your mortgage and home equity loan
| Pros | Cons |
| Single monthly payment simplifies budgeting | Closing costs can run thousands of dollars |
| Potentially lower blended interest rate | You may lose a low rate on your existing first mortgage |
| Fixed rate eliminates variable rate risk | Could extend your repayment timeline |
| Easier to track one loan instead of two | Requires sufficient equity to qualify |
| Possible tax benefits (consult a tax advisor) | Your home remains collateral for a larger loan amount |
The right choice depends on your specific numbers. Run the calculations before deciding.
Verify your HELOC eligibility. Start here
Alternatives to refinancing your HELOC and mortgage together
If consolidation doesn’t fit your situation, whether because of rates, equity, or timing, you still have options to manage your HELOC more effectively.
Refinance only your HELOC into a new equity line
If your first mortgage has a great rate you want to keep, you can refinance just the HELOC. This means opening a new HELOC to pay off the old one.
Why would you do this? You might get a lower rate, better terms, or a fresh draw period. Some lenders offer promotional rates for new HELOCs that beat what you’re currently paying.
Open a new HELOC with a different bank
You’re not limited to your current lender. You can get a HELOC with a different bank than your mortgage lender, and shopping around often uncovers better rates.
A new lender can provide a HELOC that pays off your existing one. Compare offers from at least three lenders to see what’s available.
Pay down your HELOC balance aggressively
Sometimes the simplest approach works best. If refinancing doesn’t pencil out, focus on paying down your HELOC principal as quickly as possible.
During the draw period, you typically have flexibility to pay more than the minimum. Every extra dollar goes toward principal, which reduces your balance and the interest you’ll pay over time. This approach avoids all refinancing costs.
Find the right lender to consolidate your HELOC and mortgage
Whether you can roll a home equity loan into your mortgage depends on finding the right lender and loan program for your financial situation. Rates, fees, and qualification requirements vary significantly between lenders.
Comparing multiple offers is the best way to find favorable terms. Even a small difference in interest rate can save thousands over the life of your loan.
Time to make a move? Let us find the right mortgage for you
FAQs about consolidating your HELOC and mortgage
A HELOC is a separate, second loan secured by your home. It doesn’t change the terms of your first mortgage. However, lenders consider both loans when calculating your total debt and loan-to-value ratio for any future financing.
Yes. You can typically roll a home equity loan or HELOC into your mortgage through a cash-out refinance. The new loan pays off both existing loans and replaces them with a single mortgage.
Absolutely. You can open a HELOC with any lender, regardless of who holds your first mortgage. Shopping with multiple lenders is a smart way to find better rates and terms.
Using a HELOC to consolidate high-interest debt like credit cards can lower your overall interest costs. However, be cautious: you’re converting unsecured debt into debt secured by your home. If you can’t make payments, your house is at risk.
The information contained on The Mortgage Reports website is for informational purposes only and is not an advertisement for products offered by Full Beaker. The views and opinions expressed herein are those of the author and do not reflect the policy or position of Full Beaker, its officers, parent, or affiliates.
By refinancing an existing loan, the total finance charges incurred may be higher over the life of the loan.
