Both turn home equity into cash. A cash-out refinance replaces your mortgage with a larger one; a HELOC sits behind the mortgage you have, so your current rate stays put.
Side by side
| HELOC | Cash-out refinance | |
|---|---|---|
| Your current mortgage | Stays in place, rate and all | Paid off and replaced |
| How you get the money | A credit line you draw as needed | A lump sum at closing |
| Rate | Usually variable | Fixed or adjustable on the whole new loan |
| Closing costs | Usually lower | Similar to a purchase loan |
| Best when | Your current rate is low | Today’s rate is near or below your current rate |
When a HELOC fits
- Your current mortgage rate is lower than today’s rates.
- You need money over time, for a renovation or tuition.
- You want lower upfront costs.
When a cash-out refinance fits
- Today’s rate is close to or below your current rate.
- You want one fixed payment.
- You need a large lump sum and prefer one loan.
Guides and calculators
- Second mortgages & HELOCs
- Cash-out refinance
- Blended rate calculator
- Cash-out refinance calculator
- Refinance break-even calculator
Questions
Which costs less overall?
Compare the blended rate: the weighted average of keeping your first mortgage plus a HELOC, against one new loan. The blended rate calculator does it for you.
Is a home equity loan the same as a HELOC?
Not quite. A home equity loan pays a lump sum at a fixed rate; a HELOC is a credit line, usually at a variable rate. Both sit behind your first mortgage.
How much can I take out?
Both are capped by a combined loan-to-value limit. The cash-out refinance calculator shows the cash available at a given limit.
