What is the difference between a HELOC and a cash-out refinance?

A HELOC is a second loan that sits on top of your existing mortgage — your original loan and its rate stay in place, and you borrow against your equity separately. A cash-out refinance replaces your entire mortgage with one new, larger loan at today's rate. The HELOC keeps your old rate; the refinance gives it up.

Why does my current mortgage rate matter so much?

A cash-out refinance reprices your whole balance, not just the cash you take out. If your current rate is well below today's market rate, the extra interest on your existing balance — moved from your old rate to today's rate — can cost far more than the cash you are borrowing. The calculator shows this as a separate line so the hidden cost is visible.

When does a cash-out refinance still make sense?

A cash-out refinance can make sense if your current rate is at or above today's rates, if you want a single payment instead of two, or if you need a very large sum where the HELOC's variable rate feels risky. When your existing rate is far below market, a HELOC usually wins on total cost.

Which option has lower closing costs?

A cash-out refinance typically carries closing costs of 2–5% of the new loan amount. A HELOC usually has much lower closing costs, and some lenders charge none. The calculator lets you enter the refinance closing costs directly so they are reflected in the comparison.

Is a HELOC rate fixed?

No. A HELOC rate is variable — tied to the prime rate, it moves when the Fed changes rates. A cash-out refinance into a fixed-rate mortgage locks your rate. The calculator holds the HELOC rate constant; in reality it can rise or fall over the life of the line. This is an estimate, not financial advice.

New

HELOC vs. Cash-Out Refinance Calculator — Which Costs Less to Tap Equity?

Pull the same amount of cash from your home two ways and compare them: a HELOC layered on top of your current mortgage, or a cash-out refinance that replaces the whole loan. See the monthly payment and the real cost of giving up a low first-mortgage rate.

HELOC Path — Total Monthly Payment

$1,922

Inputs

Current Mortgage Balance

What you still owe on your existing first mortgage

$0$2,000,000

Current Mortgage Rate (%)

Your existing rate — a cash-out refi makes you give this up

1%12%

Years Left on Current Mortgage

130

Cash You Want to Borrow

The amount of equity you want to pull out — same for both options

$5,000$500,000

HELOC Rate (APR, %)

Variable rate tied to prime — applies only to the cash you draw

4%16%

HELOC Repayment Term (years)

525

Cash-Out Refinance Rate (%)

Today's 30-year rate — applied to your ENTIRE new balance

3%12%

Cash-Out Refinance Closing Costs

Typically 2-5% of the loan. A HELOC usually has far lower or no costs

$0$30,000

HELOC Path — Total Monthly Payment

$1,922

Your Current Mortgage Payment

$1,402

Monthly Difference — Refi minus HELOC Path

$265

Rate Increase on Your Existing Balance

3.00%

HELOC Path — Total Interest on the New Cash

$64,967

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Coach Insight

The decision turns on one number: your current mortgage rate. A HELOC leaves your existing first mortgage and its rate completely untouched — it adds a second payment that charges interest only on the cash you draw. A cash-out refinance replaces your entire mortgage at today's rate, so if you locked in a low rate years ago, a refinance reprices your whole balance, not just the new money. With 30-year rates stuck in the mid-6% range and millions of homeowners holding sub-4% mortgages, that repricing penalty is often far larger than the headline refinance rate suggests.

Frequently Asked Questions

Everything you need to know.

Related Calculators

HELOC vs. Home Equity Loan Calculator

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Compare a fixed-rate home equity loan against a variable-rate HELOC — monthly payment, total interest, and payment-shock risk for the same amount borrowed.

HELOC Payment Calculator

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Calculate your monthly HELOC payment and total interest cost.

Refinance Savings Calculator

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How much will refinancing actually save you, net of closing costs?

Why This Matters

How to Use It

1Enter your current mortgage balance, rate, and years remaining
2Enter the amount of cash you want to borrow
3Set the HELOC rate and repayment term, and today's cash-out refinance rate
4Add the refinance closing costs so the comparison is honest
5Compare the total monthly payment of each path and the lifetime cost of repricing your old balance

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