How to Convert a Home Equity Line of Credit

••• Hipoteca 2 image by Nuka from

If you have a home equity line of credit (HELOC), and you’re nearing the end of the withdrawal period or if the adjustable interest rates are high, you can convert the line of credit to a conventional loan. While a HELOC allows the homeowner to withdraw money as needed, paying only interest on the withdrawn amount, you may want a traditional loan with set monthly payments. When you’re ready to convert your HELOC, you have a few options.

Contact your bank about the current interest rates for a second mortgage. Interest rates are negotiable, and they depend upon your credit score and your payment history. Banks offer better interest rates for homeowners with higher credit scores.

Choose the type of loan that best suits your needs. Your banker may suggest a fixed rate loan, extended over five or 10 years, depending upon your ability to make the monthly payments if you plan to stay in the home. However, if you plan to sell your home within three years, an adjustable rate loan with a low initial interest rate may save you the most money.

Merge your HELOC with your mortgage in a refinance. This option may be better for homeowners who purchased their house when the interest rates were more than two points higher than today’s rates. By refinancing the home and adding the HELOC, you will make only one monthly payment and you may save money on both loans.

Supply proof of employment--up to six months of recent paycheck stubs or copies of your last two years of income taxes. In addition, list your current monthly payments, including car notes, minimum credit card payments, insurance premiums and all other recurring monthly debts.


  • You have a three-day “right of recession” after taking out a new loan. If, for any reason, you discover that the new loan does not meet your expectations, give the bank a written letter, stating that you want out of the loan.


  • Before applying for a loan conversion or refinancing a mortgage to include your HELOC, check your credit report and remove any erroneous information.

    Refrain from buying a car or another large ticket item just before applying for a loan. The additional monthly payments may disqualify your loan application.


About the Author

Glenda Taylor is a contractor and a full-time writer specializing in construction writing. She also enjoys writing business and finance, food and drink and pet-related articles. Her education includes marketing and a bachelor's degree in journalism from the University of Kansas.

Photo Credits