Home Equity

HELOC vs. Cash-Out Refinance

Both a HELOC and a cash-out refinance let you access equity you've built in your home — but they work differently. The right choice depends on how much you need, whether you want ongoing access or a lump sum, and what happens to your current mortgage rate.

HELOCrevolving line of credit

Cash-Out Refilump sum at closing

Your Ratethe deciding factor

Side-by-Side Comparison

HELOC

Revolving line of credit — draw, repay, and draw again during the draw period
Only pay interest on what you actually use
Keeps your existing first mortgage and its rate in place
Variable rate during the draw period in most cases
Lower upfront costs than a full refinance

Great for

Homeowners with a low first mortgage rate they don't want to touch
Ongoing or staged expenses like home renovations
Borrowers who want flexibility rather than a fixed lump sum

Cash-Out Refinance

Replaces your existing mortgage with a new, larger loan
Receive the difference between the new loan and old balance as cash at closing
Single loan, single fixed monthly payment
Fixed rate locks in your payment for the life of the loan
Makes sense when your current rate is close to or higher than today's rates

Great for

Borrowers who want a fixed-rate, single-payment structure
Large lump-sum needs like debt consolidation or a major purchase
Homeowners whose current rate is already near market rates

How to Choose

If you have a low first mortgage rate, a HELOC lets you access equity without resetting your rate on the full balance — which often keeps your overall cost lower.

If you need a large, one-time amount and want a predictable fixed payment, a cash-out refinance consolidates everything into one loan with a set monthly cost.

The right answer depends on your current rate, your equity position, how you plan to use the funds, and your tolerance for a variable vs. fixed payment.