Dec 10, 2025
HELOCs might seem like an easy way to turn rising home equity into cash, especially when you’re struggling to make more than the interest-only payment each month. That’s exactly the spot Josh from Seattle said he was in when he called The Ramsey Show (1).
Josh’s plan was to convert the home equity line of credit (HELOC) to a mortgage because, he said, he and his wife were only able to make interest-only payments on the loan.
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He told co-hosts Rachel Cruze and Jade Warshaw that because they paid $3,700 a month for private school for their four kids, they could only afford to make the $450 minimum payment on the HELOC, which totals $65,208. They took out the HELOC to do home renovations.
But then he told the co-hosts how much they make: $11,500 a month. And their mortgage is paid off. Once the hosts learned that Josh had no mortgage and a six-figure income, their advice came quickly and clearly.
Why the hosts say the payment wasn’t the problem
From the hosts’ perspective, Josh didn’t have a cash flow problem — he had a motivation problem.
“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.
Warshaw chimed in: “There’s the problem. OK, now Rachel, now we got to the bottom of it. It has nothing to do with the payment. It has to do with the fact that you’re like, ‘I’m tired of paying this. Can’t I just roll it into my mortgage [...] or create a mortgage out of it?’”
Rachel Cruze didn’t pull punches: “Where’s all your money going, Josh? I’m confused.”
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Cruze went on to say that, as a rule of thumb, she would recommend that if a HELOC is more than half of your annual income, then she would advise to roll it into your primary mortgage.
Since Josh’s loan is less than half of the family’s annual income, her advice was different: “Shop at Aldi. Don’t go out to eat. Don’t go on vacation. Cut subscriptions. Do nothing until this is paid off.”
In other words, they suggested Josh temporarily slash his lifestyle so every extra dollar can go toward the $65,000 balance. By treating the HELOC like an emergency and attacking it quickly, the family can get back to building wealth instead of letting the debt linger for years.
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To HELOC or not to HELOC
A HELOC is a way to borrow money using the equity in your home, essentially a loan for which the collateral is your home. The FTC describes a HELOC as a “revolving line of credit, similar to a credit card, except it’s secured by your home” (2).
The risk with this is that if you are unable to repay the balance, the lender can take your home to settle your debt. HELOCs typically have variable interest rates, which can become an issue when interest rates, and your payments, go up.
The variable interest rate on his HELOC was one of the reasons caller Josh gave for wanting to convert his HELOC to a mortgage. If you converted a HELOC into a mortgage, you could opt to get a mortgage with a fixed interest rate. Mortgage rates are also typically lower than rates for HELOCs (3).
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In practice, converting a HELOC into a mortgage usually means taking out a new mortgage (or refinancing an existing one) and using that lump sum to pay off the line of credit. You’ll likely face closing costs and fees, and you’re turning what was essentially a second, more flexible loan back into long-term mortgage debt.
If you had a mortgage and a HELOC, and you wanted to roll the HELOC into a new mortgage, you might have to do a cash-out refinance, where you replace your mortgage with a bigger mortgage, and take the difference in cash to pay down your HELOC (4).
Many financial professionals warn that repeatedly rolling short-term debts into a long-term mortgage can keep you in debt longer and increase the total interest you pay, and because your home is on the line, you’re taking on more risk if you later struggle with payments. That helps explain why, in Josh’s case, the Ramsey Show hosts felt that converting his HELOC to a new mortgage would create more long-term risk than benefit.
Still, the Ramsey Show hosts agreed that, since Josh’s HELOC was less than half his annual income, it made more sense for him to bite the bullet and pay off the loan.
How to pay off a HELOC
The Ramsey Show hosts advise Josh that, in order to pay down his debt, he has to “go back to Baby Step Two,” which is a series of steps that Dave Ramsey created to help people get out of debt.
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What this means for Josh, or anyone trying to pay down debt, is choosing a debt repayment method and sticking with it. Ramsey promotes the “debt snowball” method, where you start by aggressively paying down your smallest debt first, making minimum payments on all other debts. Once the smallest debt is paid off, you apply the same method to the next-smallest debt, and so on, until you are debt free.
There is also the “debt avalanche” method, which uses the same method, except the first debt you pay off is the one with the highest interest rate. This method will save you more money in interest, but it can be harder, as tackling the highest-interest-rate debt can be harder.
The Ramsey Show co-hosts were concerned that, for a caller like Josh, with a high income, the decision to convert his HELOC to a mortgage was “kicking the can down the road,” when he does have the means to get rid of the debt.
If you do decide to convert a HELOC to a mortgage, it’s important to understand the trade-offs: you may face closing costs, extend your repayment timeline and expose your home to more risk if you run into trouble later. Some borrowers also look at refinancing a HELOC or shopping for a better rate, but taking on new credit can make it easier to borrow more and stay in debt longer if you’re not careful (5).
For Josh, the Ramsey Show hosts argued that the simpler path was also the tougher one: accept that the home renovation and private school bills have consequences, cut back hard for a couple of years and wipe out the $65,000 HELOC for good. For other homeowners in a similar position, the key takeaway is to look at your income, your risk tolerance and your long-term goals before turning a short-term line of credit into long-term mortgage debt.
Article sources
We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines.
The Ramsey Show Highlights (1); Federal Trade Commission (2, 4); Rocket Mortgage (3, 5)
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Rebecca Payne has more than a decade of experience editing and producing both local and national daily newspapers. She's worked on the Toronto Star, the Globe and Mail, Metro, Canada's National Observer, the Virginian-Pilot and Daily Press.
