How to Use a HELOC to Pay Off the Mortgage

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If you have an amount of equity in your home that is large enough to pay off your first mortgage debt, you can use a home equity line of credit, or HELOC, to pay off your first mortgage. Some homeowners want to use this option, as opposed to a refinance, because there are usually no closing costs associated with a HELOC while a mortgage refinance costs between 3 and 6 percent of the loan amount, according to the Federal Reserve. Paying off a first mortgage debt with a HELOC should only be done if the HELOC has a lower interest rate than the first mortgage.

Apply for a HELOC with a mortgage lender. Fill out a mortgage loan application and provide the lender with two months of pay stubs, two months of bank statements and two years of tax returns. Make sure to apply for a HELOC that is in the same amount or larger than the principal balance on your first mortgage.

Allow the lender to process your application by checking your credit and ordering an appraisal. Remember, you will only be approved for your HELOC amount if you meet the credit requirements on the loan (usually a credit score of 620 or better) and your house has enough equity in it to support the new debt.

Once your HELOC has closed and the three-day right of rescission period ends, use the money from your HELOC to pay off your first mortgage debt in one lump sum. Call your mortgage servicer for your full payoff amount, because the balance on your mortgage statement might not reflect your daily interest charge.


  • Even if your new HELOC payment is less than your original first mortgage payment, continue paying the higher monthly payment. This will pay off your debt faster and reduce your interest expense even more.


  • You are charged interest daily on your first mortgage. Be sure to pay off your first mortgage debt as soon as possible after your new HELOC closes to limit the amount of interest paid on your first mortgage debt.