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Whether or not you must include your Home Equity Line of Credit in your refinance is going to be up to your new lender and the lender servicing the HELOC currently. In order to keep you HELOC without refinancing it inside the new loan, you need to subordinate it. Subordination must be approved by the new lender and accepted by the old, if either of the lenders say “no” you will be required to pay off the HELOC in a refinance.
Even with the subordination however your CLTV (Combined Loan To Value) is going to be in the 95-100% range, and you need a new lender that is willing to finance with the CLTV between 95 and 100%, because the new lender is going to look at the new refinanced loan and the debt of your current HELOC to qualify you.
CLTV restrictions vary between states and counties so you need to discuss your options with someone familiar to your states lending environment. A broker in this situation is probably your best bet because of the options they have over direct lenders.
In this unpredictable market (2/12/2009), this is by no means a simple transaction, whether or not you will be able to refinance will be determined by guidelines particular to your area. There is no doubt, guidelines have been and are still tightening, so if you are serious about refinancing, you should begin the process sooner rather than later.
Yes and likely no today. If the first is under 80% LTV and the 2nd (use the credit “line” not what you “owe”) takes you over 95% — “many” 1st lien holders won’t allow the refinance and most 2nd lien holders won’t “subordinate”. If you are refinancing to pay off the 1st AND the 2nd — this is considered a cash-out refinance (even though you may not receive any “cash out”. Check with the holder on the 2nd of what their max CLTV is.
Some 2nd holders, realizing that you are typically lowering their risk by refinancing the 1st to a lower payment – may allow it (smaller credit unions and community banks are far more flexible). Much also depends on the status of your state (declining market rules).
Do I have to include my home equity line if I refinance my home? If so, what happens if the two combined take me to 95 -100% of the home value – can I still refinance?