You might be able to convert the heloc, but two items, one the rate on home equity loans are usually high, and two, home equities are tougher to come by, especially on a rental property. you could look into locking the rate like mary suggested, it depends on the lender and when you took out the heloc as the lock in feature has only been around for a few years. If you sell the rental, any proceeds will be given to you, other arrangements I would consult the irs or a cpa. you may want to look at bank of america for the home equity, I was just talking to a broker contact of mine and she claims they are doing home equities still, best of luck

Depending on what state you live in, there may be some nuances in the law. Home Equity Lines of Credit (HELOCs) often have available something called a Fixed-rate Option. You take a portion of your revolving limit, usually that which you have taken an advance on, and “fix-it” or create a closed-ended loan payable at a fixed interest rate, for a set period of time at a fixed payment.

As far as a tax penalty, depending upon what is paid to you after all other liens on your “old” house is sold, you may not have to worry about that. You’ve already purchased another home, and as long as the amount that you got out of your old home is the same or less than what you paid for your new home, you are set. There are other issues involved, such as length of time you owned the home, your income level, etc.

IRS.gov has some publications that can be pulled up online that can clarify this for you.