Both let you access home equity — but they work very differently. A cash-out refi replaces your entire mortgage at today’s rate. A HELOC leaves your first mortgage alone and adds a second. For homeowners with low existing rates, the difference can be $400–$800/month. This calculator shows which is cheaper for your exact situation.
Your current mortgage
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Your existing rate — this is the key number
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Calculating…
Cash-out refi payment
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New total monthly payment
Current pmt + HELOC
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Keep existing + add HELOC IO
Monthly difference
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Which option costs less
Savings over period
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Total cost difference
Your current monthly payment—
Cash-out refi: new full payment—
Cash-out refi: payment increase—
HELOC interest-only payment—
Total payment (current + HELOC IO)—
HELOC option: payment increase—
Cheaper option over the period—
The insight most homeowners miss: A cash-out refi rate of 6.70% sounds lower than a HELOC at 7.21% — but the refi applies that rate to your entire mortgage balance. The HELOC only applies 7.21% to the new money you borrow. If you have a low existing rate, the HELOC almost always wins by a large margin.
When Cash-Out Refinancing Makes Sense
Your current rate
Recommendation
Reason
Below 4.0%
HELOC or HEL strongly preferred
Refi adds $600–$1,500+/mo on a $300K+ balance
4.0–5.5%
HELOC or HEL preferred
Still significantly cheaper to keep existing mortgage
5.5–6.2%
Run the numbers both ways
Depends on loan size, cash needed, and term left
Above 6.2%
Cash-out refi may make sense
Existing rate is close to or above today's refi rate
How Each Option Works
Cash-out refinance
A cash-out refinance replaces your existing mortgage with a new, larger loan. The difference between your old balance and the new loan amount is paid to you as cash at closing. You start fresh with a new 30-year (or 15-year) mortgage at today's rate. Simple — one loan — but expensive if your existing rate is low.
HELOC (Home Equity Line of Credit)
A HELOC is a revolving credit line at a variable rate, secured by your home equity. It sits behind your first mortgage — your first mortgage stays completely unchanged. You only pay interest on what you borrow, and the rate is variable (currently averaging 7.21% nationally). You can draw, repay, and redraw during the 10-year draw period.
Home equity loan
A home equity loan is a fixed-rate lump sum — like a HELOC but with a fixed rate and no revolving feature. It also leaves your first mortgage untouched. Current national average: 7.36% APR fixed. Better than a HELOC if you want payment certainty; better than a cash-out refi if your existing rate is low.
Frequently Asked Questions
What is a cash-out refinance?
📚 A cash-out refinance replaces your existing mortgage with a new, larger mortgage. The difference is paid to you as cash at closing. For example: you owe $300,000, refinance to $380,000, and receive $80,000 cash. Your entire mortgage resets at the new rate and a new 30-year term. All of your debt is consolidated into one loan at today's rate.
When does cash-out refinancing beat a HELOC?
Cash-out refinancing is better when your existing mortgage rate is close to or above today's refi rates (currently ~6.70%), when you want to simplify to one loan, or when your HELOC rate would be significantly higher than the refi rate due to credit or CLTV. For the majority of homeowners who locked in rates between 2020 and 2022 at 2.5–4.5%, the HELOC wins decisively.
What is the maximum I can borrow with a cash-out refinance?
Most lenders allow you to borrow up to 80% of your home's current appraised value on a conventional cash-out refinance. VA cash-out refinances allow up to 100% LTV. FHA cash-out refinances allow up to 80% LTV. The limit on how much cash you can take out is: (Home Value × 80%) − Current Mortgage Balance.
