Switch to a Variable Rate Mortgage
Another option is to switch to a variable rate mortgage. If your main objective is to save on interest, switching your HELOC balance to a variable rate mortgage can do that. Variable rate mortgages are about 1.50% lower than HELOC rates at that time of this article.
Variable rate mortgages are priced in a way that you’ll almost always savings interest. While HELOCs are almost always priced at Prime plus something, variable rate mortgages are almost always priced at Prime minus something.
For example, your HELOC might be Prime + 0.50%, while your variable rate mortgage is Prime – 1.00%. No matter what Prime Rate is, your variable rate mortgage interest rate will always be lower.
That being said, if paying the lowest payment possible is your main objective, it probably makes the most sense to stick with a HELOC, as your payments will be higher if you go with a variable rate mortgage. That’s because you’re required to make principal and interest payments.
If you went with a variable rate mortgage at a rate of 1.45%, your monthly payment would be $795 based on a balance of $200,000. That’s $305 more than you’d be currently paying with your HELOC.