HELOC vs. cash-out refinance
A HELOC keeps your mortgage and adds a second loan; a cash-out refinance replaces your whole mortgage. Compare the total monthly payment for each.
HELOC + keep mortgage
Total monthly (mortgage + HELOC interest)
$2,004.17/mo
$50,000 HELOC, interest-only during draw
Cash-out refinance
Total monthly (one new loan)
$1,896.20/mo
$300,000 loan at 6.5%
On monthly payment alone, the cash-out refinance is cheaper by $107.96/mo. But a refinance resets your whole mortgage and charges closing costs on the full balance — so if your current rate is already low, a HELOC usually wins even when its payment looks higher.
How to compare offers→HELOC vs. cash-out refinance, side by side
| HELOC | Cash-out refinance | |
|---|---|---|
| Structure | Second loan on top of your mortgage | Replaces your whole mortgage |
| Your current rate | Untouched | Reset to today's rate |
| Closing costs | Low or none | 2–5% of the full new loan |
| Rate type | Usually variable | Usually fixed |
| Best when | Your mortgage rate is already low | Today's rate beats your current rate |
| Cash access | Draw as needed | Lump sum at closing |
How to compare HELOC & refinance offers
The right choice hinges on the rates you’re offered versus your current rate. Comparing multiple lenders is the single biggest factor in your cost.
What to compare before you sign
- Compare APR and points, not just the rate. APR folds in lender fees, so it's the fairer comparison. Also check whether a quoted rate assumes you pay discount points up front.
- Weigh closing costs against the savings. Refinancing usually costs 2–5% of the loan. That's what sets your break-even point — how many months until the lower payment pays back those costs.
- Mind the loan term. A lower rate on a longer term can still cost more total interest. Compare lifetime cost, not just the monthly payment.
- Get at least three quotes. On a balance this size, a small rate difference compounds over the life of the loan. Quoting several lenders is the biggest lever on your cost.
Free, unbiased basics: CFPB: shopping for a mortgage refinance.
Frequently asked questions
Is a HELOC or cash-out refinance cheaper?+
It depends on your current mortgage rate. If your existing rate is already low, a HELOC is usually cheaper because a cash-out refinance would reset your entire balance to today's higher rate and charge closing costs on the full loan. If today's rates are at or below your current rate, a cash-out refinance can win.
Why does my current mortgage rate matter so much?+
A cash-out refinance replaces your entire mortgage, so you give up your old rate on the whole balance — not just the cash you take. A HELOC leaves your original low-rate mortgage in place and only charges interest on the new, smaller amount.
Which has higher closing costs?+
A cash-out refinance. Because you refinance the full balance, closing costs (typically 2–5%) apply to the entire new loan. A HELOC has low or no closing costs, which is a major reason it's cheaper for smaller cash needs.
Can I take more cash with a refinance or a HELOC?+
Both are typically capped around 80% combined loan-to-value, so the maximum cash is similar. The difference is cost and structure, not how much equity you can tap.
More home equity calculators
How Much HELOC Can I Get?
→See your borrowing power from home value minus your mortgage.
HELOC Calculator by State
→Estimate your HELOC with your state's typical home value.
HELOC Payment Calculator
→Interest-only draw payment vs. principal + interest repayment.
Home Equity Loan Calculator
→Fixed monthly payment on a lump-sum home equity loan.
Cash-Out Refinance Calculator
→New loan, new payment and cash out from a refinance.
Refinance Break-Even Calculator
→Months to recoup closing costs after a refinance.
HELOC vs. Home Equity Loan
→Side-by-side: revolving line vs. fixed lump sum.