Can you modify a home equity loan or HELOC? Here’s how

Money gets tight for all kinds of reasons, and a home equity loan modification could make your payments more manageable. You can request a modification with your loan servicer to see what options are available.

A modification of a home equity loan or home equity line of credit (HELOC) permanently changes the terms of your existing loan. They're not common, and are generally designed to help you through a period of financial hardship.

What is a home equity loan modification?

A home equity loan or HELOC modification is a permanent change to your loan terms to make your payments more affordable if you’re facing demonstrable financial hardship. A modification might freeze a variable interest rate, reduce your rate, or extend your repayment term. 

Loan modifications are different from forbearance or refinancing:

• Forbearance temporarily pauses or reduces your payments. You'll generally need to repay those amounts later. 

• Refinancing replaces your existing loan with a new one. 

• Modification keeps the same loan, but permanently changes its terms.

You typically request a modification through the loan servicer that manages your home equity loan or HELOC account. Achieve Loans uses LoanCare and Shellpoint as the servicers for its loans. If you have a HELOC through Achieve Loans, contact the servicer to ask about your options. 

If you're already behind on payments, our guide on what happens if you default on a home equity loan covers what to expect.

How a home equity loan or HELOC modification works

The home equity loan modification process starts when you contact your loan servicer. 

• Reach out to your loan servicer as early as possible. 

• Explain your financial hardship, and submit a loss mitigation application with documentation about your income and hardship. 

• The servicer will review your situation and determine whether you qualify for a modification or another form of mortgage assistance.

The timeline for the review process varies by loan servicer, but servicers typically make a decision within 30 days. Servicers sometimes need additional documentation, so watch out for calls or messages and make sure to provide any requested documents as soon as possible. 

If your request is approved, you'll receive new loan terms, which could include a lower payment, a longer repayment term, or another approved change based on your situation.

Your home equity loan modification may begin with a trial payment plan that lasts a few months. If you make each trial payment on time, the servicer completes the paperwork, and the modification becomes permanent.

If you'd like help preparing your application, a U.S. Department of Housing and Urban Development (HUD)-approved housing counselor can explain your options. If a modification isn't the best fit, a hardship loan might be another way to manage a temporary financial setback.

Who qualifies for a modification?

Lenders generally look for a documented financial hardship, such as a job loss, a medical event, or a drop in income. They’ll also want confirmation that you have enough stable income to afford the modified payment. These factors help the servicer understand your situation and determine whether a modification is possible.

Approval isn't guaranteed. Home equity loan and HELOC modifications aren't as common as modifications for a primary mortgage loan. The servicer reviews your financial situation along with internal guidelines for your loan before making a decision. 

If your request is denied, ask why. It may also be worth asking whether another form of mortgage assistance might be available. This could help you plan your next steps.

Pros and cons of a home equity loan modification

A home equity loan modification could:

• Lower your monthly payment

• Help you catch up if you’ve fallen behind 

• Make it easier to stay current going forward

For many homeowners, those changes provide the breathing room they need during a financial hardship. There are trade-offs to consider, too: 

• Extending your repayment term could increase the total interest you pay over the life of the loan. 

• Your servicer might also report the modification to the credit bureaus, which could affect your credit, and approval isn't guaranteed. 

• Once your modification is finalized, the new loan terms are permanent.

There is also the standing consideration for any mortgage: A home equity loan or HELOC is secured by your home. If you don't repay the loan as agreed, you could lose your home.

Can you get a home equity loan after a loan modification?

It’s possible to get a home equity loan after a loan modification, but it could be difficult. Because a loan modification usually reflects a financial hardship, lenders consider it a risk factor. 

Your likelihood of an approval depends on several variables, including how long it has been since the loan modification and how you managed payments.

Many lenders require that you wait 12 to 24 months from your loan modification date before applying for a new home equity loan. If you’ve made your payments on time and maintained or increased your home equity, then you could qualify for a new loan. Before you apply, review our guide to home equity loan requirements so you'll know what lenders typically look for.

The status of your previous home equity loan or HELOC is also important. Trying to get a second home equity loan in addition to an existing loan, for instance, is already challenging—and even more so after a loan modification. Lenders are generally more likely to approve a home equity loan after modification if you’re refinancing your original loan or if you’ve already paid it off.