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HELOC vs Cash-Out Refinance Calculator
Compare your home equity options side by side — see real costs, monthly payments, and which choice saves you more money
Quick Overview
Who Should Use This
Homeowners with equity who need cash for renovations, debt payoff, or large expenses, and are deciding between a HELOC or a cash-out refinance.
Purpose
Compare the true total cost of accessing home equity via HELOC vs. cash-out refinancing — monthly payments, rates, closing costs, and long-term costs over your hold period.
Example
Need $75K from a $450K home ($280K mortgage) — cash-out refi at 6.75% costs $200 more/month but has a fixed rate, while a HELOC at 8.5% has lower initial payments but variable rate risk.
Loan Details
Pro Tip: If your current mortgage rate is lower than today's rates, a cash-out refinance will raise your monthly payment. A HELOC keeps your first mortgage untouched — often the smarter move when rates have risen.
Comparison Results
Our Analysis Says
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Enter your details above and click Compare to see the recommendation.
Available Home Equity
$0
Current LTV: 0% | Max borrow at 80% LTV: $0
HELOC
$0
draw period payment (interest only)
Repayment Payment$0
Total Interest$0
Closing Costs$0
Total Cost$0
Rate TypeVariable
Cash-Out Refi
$0
new total monthly payment
Old Payment Was$0
Payment Change$0
Total Interest$0
Closing Costs$0
Rate TypeFixed
Total Interest Cost Comparison
HELOC Total Interest$0
Cash-Out Refi Interest (on borrowed amount)$0
HELOC Payment Timeline
Draw Period
10 yrs
$0/mo interest only
Repayment Period
15 yrs
$0/mo principal + interest
Total HELOC Duration25 years
Refi Break-Even Point
—
Months to recoup refinance closing costs
How to Use
How to Compare HELOC vs Cash-Out Refi
Get a personalized side-by-side analysis in 4 steps
1
Enter Your Equity
Input your home value, current mortgage balance, and how much cash you need. The calculator shows your available equity and borrowing limit.
2
Enter HELOC Terms
Input the HELOC rate from your bank and the draw/repayment periods. Most HELOCs have 10-year draw periods followed by 15–20 year repayment.
3
Enter Refi Terms
Input the cash-out refinance rate and estimated closing costs (typically 2–5% of the new loan amount). Don't forget to factor in your new loan term.
4
Review & Decide
Compare total interest costs, monthly payment changes, break-even timeline for the refi, and see our recommendation based on your numbers.
HELOC vs Cash-Out Refinance: Key Differences
Both options let you tap your home equity for cash, but they work very differently. A HELOC is a second mortgage — it sits alongside your existing loan and doesn't change your first mortgage rate or payment. A cash-out refinance replaces your entire mortgage with a new, larger loan.
The right choice depends heavily on your current mortgage rate. If you locked in a low rate (below 5%), a HELOC is almost always better — you keep your low first mortgage and only pay higher rates on the new equity you're tapping.
The Rate Context Matters Most
- Low existing rate (under 5%): HELOC wins. Protect your low first mortgage rate.
- High existing rate (over 7%): Cash-out refi may win if you can lower your overall rate while accessing equity.
- Need money in stages: HELOC wins. Draw only what you need, when you need it — ideal for remodels.
- Want payment certainty: Cash-out refi wins. Fixed rate means predictable payments for the life of the loan.
- Short time horizon: HELOC wins. Lower upfront costs mean less risk if you sell in 3–5 years.
Home Equity Tools
Everything You Need to Know
Key concepts for making a smart equity decision
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How a HELOC Works
A HELOC is like a credit card secured by your home. During the draw period (5–10 years), borrow up to your limit and pay interest only. Then the repayment period begins and you pay principal + interest on the outstanding balance.
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How Cash-Out Refi Works
You refinance your entire mortgage into a larger loan. Your lender pays off your old mortgage, and you receive the difference in cash at closing. You're left with one loan payment at the new rate — for the full new term.
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The 80% LTV Rule
Most lenders let you borrow up to 80% of your home's value (combined for HELOC). On a $500K home, that's $400K max. If you owe $300K, you can borrow up to $100K. Some lenders go to 85–90% but at higher rates.
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Closing Cost Difference
HELOCs typically cost $500–$2,000 to open. Cash-out refinances cost 2–5% of the new loan amount — $6,000–$15,000+ on a large loan. This upfront cost must be recouped in savings before a refi makes financial sense.
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Variable Rate Risk
HELOC rates are variable and tied to Prime Rate. If the Fed raises rates, your HELOC payment rises too. A $100K HELOC at 8.5% costs $708/month; at 10%, it costs $833. Budget for potential rate increases.
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Tax Deductibility
Interest on both HELOCs and cash-out refis may be deductible IF the funds are used for home improvements. Using equity for debt consolidation, cars, or other expenses does NOT qualify for the deduction under current tax law.
Common Questions
HELOC vs Cash-Out Refinance FAQ
HELOC (Home Equity Line of Credit):
- A second mortgage — sits alongside your existing loan
- Revolving line of credit (like a credit card)
- Variable rate tied to Prime Rate
- Draw period (interest only) + repayment period
- Lower closing costs ($500–$2,000)
- Doesn't touch your existing mortgage rate
Cash-Out Refinance:
- Replaces your entire existing mortgage
- One-time lump sum of cash at closing
- Usually fixed rate for the loan term
- One single monthly payment
- Higher closing costs (2–5% of loan amount)
- Resets your loan term and rate
Choose a HELOC when:
- Your existing mortgage rate is low (below 5–6%) — don't give up that rate
- You need money in stages — home renovation over 12–18 months, for example
- You might not use the full amount — you only pay interest on what you draw
- You plan to sell within 3–5 years — lower upfront costs pay off better short-term
- You want to keep mortgage payments separate — easier to track and pay off early
Choose a cash-out refinance when:
- Your current rate is high — if you can lower your first mortgage rate while accessing equity, the refi may win overall
- You want a fixed rate — predictable payments for the life of the loan
- You need a large lump sum — renovations with set contracts, payoff large debt, etc.
- You want one simple payment — combined first mortgage and equity in one bill
- Interest rate environment is rising — locking in a fixed rate protects you from future rate hikes
Both options are limited by your Loan-to-Value (LTV) ratio:
- Most lenders cap at 80% combined LTV
- Formula: (All loan balances ÷ Home value) × 100 = Combined LTV%
Example: $500K home, $300K mortgage balance
- Max borrowing at 80% LTV: $500K × 80% = $400K
- Minus existing mortgage: $400K - $300K = $100K available
Some lenders go to 85–90% LTV but charge higher rates. To qualify, you'll also need a credit score of 620+ (700+ for best rates) and sufficient income to support the additional payment.
You can have a cash-out refinance and then open a HELOC afterward, or have a HELOC already when you refinance. However, you can't do both at exactly the same time — they're alternative ways to access the same equity.
Some homeowners do a cash-out refinance to lower their rate AND get cash, then later open a HELOC for additional needs. This strategy works when rates drop significantly and you have ongoing equity-building projects.
Minimum requirements by option:
- HELOC minimum: 620 credit score (700+ for best rates)
- Cash-out refinance minimum: 620 (conventional), 580 (FHA)
- For best HELOC rates: 740+
- For best refi rates: 740+
Your credit score affects both your approval and rate. A 740+ score might get a HELOC at Prime + 0%, while a 640 score might get Prime + 2%. That 2% difference on a $100K HELOC costs $2,000 more per year.
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