St. Louis Mortgage Help

Should You Take Out a HELOC to Pay Off a Mortgage

May 22nd, 2019 9:05 AM by Bob Rutledge

Should You Take Out a HELOC to Pay Off a Mortgage?

Those who understand the basics of a HELOC, or home equity line of credit, tend to sing its praises. They know just how useful those loans can be when you’re trying to remodel your house or have unexpected expenses. But what about using a HELOC to pay off a mortgage? Is this even a good idea?

Since a HELOC is a loan that uses the equity in your house as collateral, it makes sense that you’d want to use it to pay off your mortgage. That would ideally leave you with one single loan. However, there are several pros and cons here that need to be gone over before.

Heloc Vs Mortgage

Before we can start going through the pros and cons of using a HELOC to pay off a mortgage, we first need to explain the differences between these two loans. Although there is no clear winner when comparing HELOC vs mortgage, as both have their good and bad points, both of these loans are quite different. A HELOC is a loan that’s taken out on the equity in your home. This is the amount that’s available when you subtract the amount that you owe on your mortgage from the overall worth of your home. A mortgage, on the other hand, is a loan that’s taken out in order to purchase or refinance a home. Those funds are set into a fixed loan for that single purpose. This makes it quite different than a HELOC, which is designed kind of like a bank account in that you can use the money, pay it back, and then use it again. For this reason, some people wonder if they could use a HELOC to pay off a mortgage. You can always check out our site for these types of tips, or a reputable HELOC information site to keep up to date. The concept of going down to this one single loan is quite appealing. Before you start to contemplate HELOC vs mortgage, it’s important to consider the following points.

How Much Is Left On Your Mortgage?

One important thing to think about before you make your HELOC vs mortgage choice is whether or not you have the funds available on your HELOC in order to pay off your mortgage. Plus, you need to understand that the closer you are to paying off that mortgage, the more your payment amounts go straight to the principle. However, if the overall worth of your home has gone up considerably and your mortgage is fairly small – yet has years left to go – then you could use a HELOC to pay off a mortgage.

Are You Eligible for a Heloc?

Another factor is whether or not you’re eligible for a HELOC as far as your credit is concerned. If you received your mortgage more than seven years ago and have damaged your credit rating since then, you may not be able to take out that additional loan. In this case, then you clearly won’t be able to use a HELOC to pay off a mortgage. This leaves the mortgage as the best option when weighing the HELOC vs mortgage loans.

Other Pros and Cons

On top of the responses to those two questions, there are some additional pros and cons that must be considered when trying to choose whether or not to use a HELOC to pay off a mortgage. Let’s work through them one by one.


  • Once you pay off your mortgage with a HELOC, you can pay down the loan and use those funds for something else.
  • In the beginning, you’ll only have to make interesting payments on the HELOC. This makes it a more attractive option when comparing a HELOC vs mortgage.


  • Your interest rate may vary. The best thing about a traditional mortgage is the fact that it tends to have a fixed rate of interest.
  • There may be prepayment penalties tied to your mortgage loan, making it more expensive to pay off.

The Decision

When trying to choose whether or not to use a HELOC to pay off a mortgage, it’s really up to you. There are a number of different factors, some of which can help you choose which is the most important to pay off first – HELOC vs mortgage. Both have their own sets of pros and cons, although the HELOC is much more flexible.


My Favorite Blogs:

Sites That Link to This Blog:

Bob Rutledge Mortgage

Loan Officer NMLS#: 297044

New American Funding 12321 Olive Blvd, ste 150
St. Louis, MO 63141