Cash-Out Refinance vs HELOC
Compare cash-out refinances and HELOCs — replacing your mortgage vs. adding a second lien.
Overview
A cash-out refinance replaces your existing mortgage with a larger new one and gives you the difference in cash. A HELOC leaves your existing mortgage in place and adds a second-lien credit line. The right choice depends largely on whether your existing rate is better or worse than today's.
Choose Cash-Out Refinance when...
Choose a cash-out refinance when today's rates are lower than your current mortgage and you want to consolidate first and second liens at a fixed rate.
Choose HELOC when...
Choose a HELOC when your current mortgage rate is lower than today's — keep the cheap first lien intact and tap equity through the second lien.
Our Verdict
If your current mortgage rate is lower than today's rates, never refinance — keep that loan and use a HELOC for any equity tap. If today's rates are lower than your current mortgage, a cash-out refi can both lower your payment and pull cash. Run both options side-by-side; closing costs matter a lot in the math.
Frequently Asked Questions
What is the difference between Cash-Out Refinance and HELOC?
A cash-out refinance replaces your existing mortgage with a larger new one and gives you the difference in cash. A HELOC leaves your existing mortgage in place and adds a second-lien credit line. The right choice depends largely on whether your existing rate is better or worse than today's.
When should I choose Cash-Out Refinance over HELOC?
Choose a cash-out refinance when today's rates are lower than your current mortgage and you want to consolidate first and second liens at a fixed rate.
When should I choose HELOC over Cash-Out Refinance?
Choose a HELOC when your current mortgage rate is lower than today's — keep the cheap first lien intact and tap equity through the second lien.
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