How to Cancel a HELOC: The Complete Guide (Plus When You Shouldn't)

Ready to close your HELOC? Not so fast.

Canceling a home equity line of credit isn't always free — and it isn't always smart. Before you call your lender, let's make sure closing is actually the right move.

When Canceling Your HELOC Makes Sense

There are legitimate reasons to close your HELOC:

You're selling your home. The HELOC must be paid off and closed at sale. This is non-negotiable.

You're refinancing your first mortgage. Your new lender may require HELOC payoff, or subordination adds complexity.

The annual fee isn't worth it. Some HELOCs charge $50-100/year. If you're not using it and won't need it, that's wasted money.

You're tempted to overspend. If available credit is too tempting, removing it can be a valid financial decision.

You got a better HELOC. Closing an old line to consolidate with a new, better-rate HELOC makes sense.

When You Should Keep Your HELOC Open

Sometimes the smarter move is leaving it alone:

It's your emergency fund backup. A HELOC you're not using costs nothing (if no annual fee) and provides instant access to cash for emergencies.

The rate is grandfathered. Older HELOCs sometimes have rate caps or terms that new lines don't match.

It helps your credit utilization. Available credit you're not using can actually improve your credit score.

You might need it later. Requalifying for a new HELOC takes weeks and requires income verification. Your open line is ready now.

There's an early termination fee. If closing triggers a $300-500 penalty, waiting until the fee period expires might save money.

Early Termination Fees: What to Know

Most HELOCs have early termination fees if you close within the first 2-3 years.

Typical fee structure:

• Years 1-2: $500
• Year 3: $300-400
• Years 4+: Usually no fee

Check your HELOC agreement for exact terms. The fee is designed to recoup the lender's closing costs if you close too quickly.

How to avoid the fee:

• Wait until the fee period expires
• Ask your lender for a fee waiver (sometimes granted for loyal customers)
• Factor the fee into your decision — sometimes it's worth paying

How to Close Your HELOC: Step-by-Step

Ready to proceed? Here's the process:

Step 1: Pay Your Balance to Zero

You cannot close a HELOC with an outstanding balance. Pay it off completely before requesting closure.

If you can't pay it off, your options are:

• Refinance into a different loan
• Convert to a fixed home equity loan (some lenders offer this)
• Reduce the credit limit instead of closing

Step 2: Request Closure in Writing

Call your lender and tell them you want to close your HELOC. Follow up with written confirmation.

What to include:

• Your name and account number
• Statement that you want to close the HELOC
• Request for written confirmation of closure
• Date and signature

Step 3: Get Confirmation

The lender should send you:

• Written confirmation of closure
• Final statement showing zero balance
• Information about lien release

Keep these documents. You'll need them if there's ever a question about the account status.

Step 4: Verify the Lien Release

This is the step people forget. Your HELOC placed a lien on your home. When closed, that lien should be released.

The lender typically files a lien release (also called "satisfaction" or "reconveyance") with your county recorder. This can take 30-90 days.

Verify it happened:

• Request a copy of the release document from your lender
• Check your county recorder's website after 60-90 days
• Address any issues promptly — unreleased liens cause problems when you sell

Timeline: How Long Does Closing Take?

Plan on 2-3 months from closure request to fully cleared lien records.

Alternative: Reduce Your Credit Limit

Not sure you want to close entirely? You can reduce your credit limit instead.

Benefits of reducing vs. closing:

• Keep the account open for emergencies
• Reduce temptation to overspend
• Maintain the credit history (helps your score)
• Avoid early termination fees
• Can increase limit later without reapplying

Call your lender and request a credit line reduction. Most will accommodate this with minimal hassle.

Credit Score Impact of Closing

Closing a HELOC has minimal credit impact for most people, but here's what happens:

Potential slight negative:

• Reduced available credit (affects utilization ratio)
• Shorter average account age if it's an old account

Potential slight positive:

• One less account to manage
• Removes a credit inquiry from your recent history over time

For most people: The impact is negligible. Don't keep a HELOC you don't want just for credit score reasons.

Closing Your HELOC for a Refinance

If you're refinancing your first mortgage, you have two options:

Option 1: Subordination Your HELOC lender agrees to remain in second position behind the new first mortgage. The HELOC stays open.

Option 2: Payoff Pay off and close the HELOC. The new lender takes first position on a clean title.

Most refinance lenders prefer payoff — it simplifies their process and eliminates lien priority questions.

If you want to keep your HELOC:

• Ask the HELOC lender about subordination early
• Expect a $200-500 subordination fee
• Not all HELOC lenders will subordinate

The Bottom Line

Closing a HELOC is straightforward once you've decided it's the right move:

1. Pay balance to zero
2. Request closure in writing
3. Get confirmation
4. Verify lien release

But before you close, ask yourself:

• Is there an early termination fee?
• Will I miss having this credit available?
• Is the annual fee really that burdensome?
• Could I just reduce the limit instead?

Sometimes keeping an unused HELOC open — as emergency backup credit — is the smarter financial move.

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FAQs

Is there a fee to cancel a HELOC?

Often yes — if you're within the first 2-3 years. Early termination fees typically range from $300-500. After the fee period, closing is usually free.

How long does it take to close a HELOC?

The account closure takes 1-2 weeks. Full lien release recording takes 2-3 months total. Plan accordingly if you're selling or refinancing.

Does closing a HELOC hurt your credit?

Minimally. You might see a slight dip from reduced available credit, but for most people, the impact is negligible and temporary.

Can I cancel a HELOC during the draw period?

Yes, you can close anytime — assuming your balance is zero and you're willing to pay any early termination fees. You don't have to wait for the draw period to end.