Man has no mortgage but wants to refinance his HELOC into a 15-year loan. Ramsey hosts say that move won’t fix the real issue

A home equity line of credit (HELOC) can feel like an easy way to let off financial pressure — especially when rising costs make it hard to get ahead and the monthly payment barely covers the interest.

That’s the situation one caller found himself in when he reached out to The Ramsey Show. Despite owning his home outright, Josh was struggling to make progress on a HELOC he had used for renovations. Each month, he and his wife were only managing the interest-only payments, so the balance wasn’t shrinking (1).

Josh's solution sounded logical on the surface: Roll the HELOC into a 15-year loan to force principal payment and bring some structure to the debt.

But as cohosts Rachel Cruze and Jade Warshaw asked more questions, a different picture emerged. The couple earns US$11,500 (C$16,000) a month, has no mortgage and their biggest financial strain comes from lifestyle choices — including significant private school tuition for their four children.

Once those details were clear, the cohosts were direct. Converting the HELOC into a new loan wouldn’t solve the problem. It would simply reshuffle it. The real issue wasn’t the type of debt — it was how their money was being allocated each month.

Why the hosts say the payment wasn’t the problem

From the cohosts’ perspective, Josh’s problem wasn’t about cash flow — it was about motivation.

“You have no mortgage. Where’s the problem here to pay $450 a month or more? You could pay $1,000 a month to pay off this HELOC,” Cruze said.

“Yeah, it would just take forever,” Josh replied, a response that shifted the conversation.

“There’s the problem,” Warshaw said. “It has nothing to do with the payment. It has to do with the fact that you’re… tired of paying this and want roll it into a mortgage instead”

Cruze was blunt. “Where’s all your money going, Josh? I’m confused.”

Cruze explained that, as a rule of thumb, rolling a HELOC into a mortgage only makes sense when the balance is more than half of your household income. In Josh’s case, the US$65,000 (C$90,000) balance was well below that threshold, given the family’s US$146K (C$203,000) annual income and lack of a mortgage.

That led to a different recommendation: Don’t restructure the debt — attack it.

“Shop at Aldi. Don’t go out to eat. Don’t go on vacation. Cut subscriptions. Do nothing until this is paid off,” Cruze said.

In other words, the hosts advised treating the HELOC like an emergency. By temporarily scaling back their lifestyle and directing every extra dollar toward the balance, the family could quickly eliminate the debt‚ instead of stretching it out for years under a new loan and calling it progress.

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To HELOC or not to HELOC

A HELOC lets you borrow money against the your home equity. It works like a revolving line of credit with your property as collateral. It usually comes with a lower interest rate than unsecured debt, but the Financial Consumer Agency of Canada (FCAC) warns the stakes are much higher if something goes wrong (2).

The main risk is straightforward: If you can’t repay the balance, the lender ultimately has a claim on your home. Most HELOCs also have variable interest rates, which means your borrowing costs — and sometimes your payments — can quickly rise when interest rates increase (3).

The variable interest was one of the reasons Josh wanted to convert his HELOC into a mortgage. Mortgages can often feel safer, with lower interest and the option of a fixed rate for a predictable payment, rather than fluctuation.

In practice, though, converting a HELOC into a mortgage usually means taking out a new mortgage, or refinancing an existing one and using that money to pay off the line of credit. That process comes with legal fees, appraisal costs and other closing expenses. More importantly, it turns flexible, short-term debt into long-term mortgage debt (4).

In Canada, homeowners who already have a mortgage and a HELOC may need to refinance and increase their mortgage balance to absorb the line of credit. While this can lower the monthly payment, it can also extend the debt over many years and increase the total amount of interest paid (5).

That’s why many financial professionals caution against repeatedly rolling non-mortgage debt into your home loan — increasing the risk if your income ever drops (6).

In Josh’s case, Cruze and Warshaw felt the numbers didn’t justify the trade-off. With no mortgage and a HELOC balance well below the household income, they argued the safer move was to focus on quickly paying the debt off — not stretching it out under a new loan and thinking it’s getting him further ahead.

How to pay off a HELOC

Cruze and Warshaw told Josh that the solution wasn’t a new loan — it was a return to basics. In Ramsey terms, that meant going back to “Baby Step Two,” the stage focused entirely on eliminating non-mortgage debt. It’s the second in a series called the 7 Baby Steps in a debt-reduction, wealth-building plan developed by Dave Ramsey.

At its core, it means picking a repayment strategy and sticking with it. One common approach is the “debt snowball” method, where you aggressively pay off your smallest balance first while making minimum payments everywhere else. Each payoff builds momentum, which can make it easier to stay committed (7).

Another option is the “debt avalanche” method, which targets the highest-interest debt first. This approach usually saves money over time, but it can feel slower and more discouraging at the start — especially if the largest and most expensive balance takes years to clear (8).

For a high-income earner like Josh, the hosts were clear that converting the HELOC into a mortgage would amount to “kicking the can down the road.” The issue wasn’t affordability — it was unwillingness to endure some short-term discomfort.

Refinancing or rolling a HELOC into a mortgage can make sense, but it comes with trade-offs. Closing costs, longer repayment timelines and increased risk to your home can all offset the benefit of lower payments. In some cases, restructuring debt can also make it easier to borrow more and stay in debt longer if spending habits don’t change.

In Josh’s case, Cruze and Warshaw argued that the simplest option was also the toughest one: accept that the renovations and private school tuition have consequences, cut back aggressively for a defined period and eliminate the $65,000 HELOC outright.

For other homeowners in a similar position, the lesson is to carefully weigh your income, risk tolerance and long-term goals before turning short-term borrowing into long-term debt tied to your home.

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Bottom line

Josh’s situation shows that refinancing debt doesn’t always fix the real problem — it can just make it easier to live with it longer. When you have a strong income and a HELOC balance that’s manageable relative to your earnings, the most effective move is often the hardest one: cutting back, reprioritizing spending and paying the debt off directly.

Before rolling short-term borrowing into long-term mortgage debt, take a hard look at your cash flow and goals. In many cases, focused effort and a clear plan can get you out of debt faster — without putting your home at greater risk.

— with files from Melanie Huddart

Article sources

We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines.

Youtube (1); Government of Canada (2, 3, 5); Mortgage Intelligence (4); Credit Canada (6); Ramsey Solutions (7, 8)