HELOC vs Cash-Out Refinance 2027 Comparison

Compare HELOC vs cash-out refinance 2027 — HELOC keeps first mortgage rate, variable; cash-out refi resets entire loan to current rates with closing costs.

HELOC Pros

Keeps existing low-rate first mortgage. Pay interest only initially. Use only what you need. Lower closing costs ($500-2k vs $10-20k for refi).

HELOC Cons

Variable rate. Can rise. Draw period ends → repayment period (jumps payment). 10-year draw + 20-year repay typical.

Cash-Out Refi Pros

Locks in fixed rate. Single payment. Can extend term. Predictable budget.

Cash-Out Refi Cons

Resets clock. If you had 3.75% first mortgage from 2021, you give it up for current 6-7%. Closing costs $10-20k.

Source: cfpb.gov HELOC vs Refi consumer guide. Last updated: May 2026.

Frequently Asked Questions

Tax deductible?

HELOC: deductible only if used for home improvement. Cash-out refi: same rule. Pre-TCJA: any HELOC deductible. Now restricted.

When does HELOC win?

Short-term need (1-3 years), low draw amount, keeping low first mortgage rate, expecting rates to drop.

When does refi win?

Want to lower first mortgage too, need 30 years to pay, large cash need, expecting rates to rise.