HELOC vs Cash-Out Refi
HELOC: variable rate (~8-10%), 10-yr draw + 20-yr repay. Cash-out refi: fixed rate, costs $4-6K. HELOC if short-term; refi if long-term + locked rate.
| Home value | — |
| Existing mortgage | — |
| Cash needed | — |
| Combined LTV | — |
| HELOC interest (10yr) | — |
| HELOC close cost | — |
| HELOC total | — |
| Refi new loan | — |
| Refi monthly | — |
| Refi lifetime interest | — |
| Refi close cost | — |
| Refi total | — |
| Winner | — |
HELOC and cash-out refinance both let you tap home equity but work very differently. HELOC: variable rate (~8-10%), 10-year draw period + 20-year repay. Cash-out refi: replaces entire mortgage at new fixed rate, $4-6K closing costs.
HELOC Wins
You need flexibility — borrow when needed, repay early. Short timeline (3-5 years). Your existing mortgage rate is low (under 5%). Closing cost matters. Use case: home improvement, emergency reserves, business funding short-term.
Cash-Out Refi Wins
You want one fixed rate. Long-term use of money (10+ years). Existing rate is higher than market. Want to consolidate debt at lower rate. Use case: debt consolidation, education funding, paying off mortgage early, home addition.
Hybrid Strategy
HELOC for flexibility + refinance later if rates drop. Or cash-out refi first + HELOC as backup. Both available simultaneously up to ~85% combined LTV. Some lenders cap at 80% combined.
Last updated May 2026. Sources: Federal Reserve HELOC.