HELOC vs Cash-Out Refi for $100,000 in Home Equity: 2026 Decision Guide

Bottom line: Your existing mortgage rate is the most important variable. If your current mortgage is at 4% or below, keep it and take a HELOC for the $100,000 — the cash-out refi forces you to refinance the entire balance at today's rates. If your current mortgage is at 6.5%+, a cash-out refi can produce a lower blended rate and may be the right call. The decision is rarely about the absolute rate on the new debt; it's about what happens to the rest of your mortgage.

The two mainstream ways to convert home equity into cash are a home equity line of credit (HELOC) and a cash-out refinance. Both let you borrow against the equity you have built in your home. Both put a lien on the property. Both require credit and income qualification.

The differences are structural and consequential. A HELOC adds a second loan on top of your existing mortgage; a cash-out refi replaces your existing mortgage entirely. That single distinction drives most of the cost math, and the right choice depends almost entirely on the rate on your current mortgage.

This guide walks through both options on a specific scenario: you have $100,000 in equity you want to access, your home is worth $600,000, and you have an existing mortgage. We work out the cost under different existing-mortgage assumptions, because that's where the real decision lies.

The Two Products

HELOC (Home Equity Line of Credit)

What it is: A revolving line of credit secured by your home, structured similarly to a credit card. The lender extends a maximum credit limit. You can draw against it as needed during a "draw period" (typically 10 years). During the draw period, you pay interest only on the amount actually drawn.

Rate: Variable, tied to the Prime Rate. The current rate formula is typically Prime + a margin of 0.5% to 2.0%. With Prime at 6.75% in mid-2026, top-tier HELOC rates run approximately 8.20%.

Closing costs: Typically $0–$2,000. Many HELOCs have no closing costs at all if you keep the line open for a minimum period (usually 3 years).

Time to close: 2–4 weeks.

Payment structure during draw period: Interest only on the drawn balance. If you draw $100,000 at 8.50% APR, the monthly interest payment is roughly $708. You can pay down principal anytime, then re-borrow up to the limit.

Repayment period: After the draw period ends (typically year 11), the HELOC converts to amortizing payments over the remaining 10–20 years. Monthly payment increases substantially at that point.

What it does NOT touch: Your existing first mortgage. The HELOC is a second lien; the original mortgage stays as it was.

Cash-Out Refinance

What it is: A new mortgage that replaces your existing mortgage. The new loan amount equals your existing mortgage balance plus the cash you want to take out. The lender pays off the old mortgage and disburses the difference to you.

Rate: Fixed (most common) or adjustable. Current 30-year fixed cash-out refi rates run approximately 6.72% — typically 15–30 basis points above purchase-mortgage rates of 6.72%.

Closing costs: Typically 2–5% of the new loan amount. On a $400,000 cash-out refi (paying off $300,000 mortgage and disbursing $100,000), closing costs of $8,000–$20,000 are common.

Time to close: 30–60 days.

Payment structure: Standard amortizing mortgage. Fixed monthly principal and interest payment over the new loan term (typically 30 years, reset).

What it touches: Everything. Your old mortgage is paid off and replaced with a new one. Whatever rate you had — even if it was 3% from a 2021 origination — is gone.

The Scenario Math: $100,000 Draw on a $600,000 Home

Let's work through three scenarios that capture most readers' situations. Common assumptions across all three:

• Home value: $600,000
• Cash needed: $100,000
• Borrower: 740+ credit, 35% DTI, owner-occupied primary residence
• 30-year loan terms throughout

What differs is the existing mortgage balance and rate. This is where the decision actually lives.

Scenario A: You Have a 3.5% Mortgage From 2021

You bought in 2021 and refinanced at a great rate. Your current mortgage:

• Balance remaining: $320,000
• Rate: 3.50%
• Monthly P&I: $1,438
• Remaining term: 26 years

Option 1: HELOC for $100,000

• HELOC rate: 8.20%
• Monthly HELOC interest (draw period): $708
• Original mortgage payment: $1,438 (unchanged)
• Total monthly payment: $2,146
• Closing costs: $0–$2,000
• You keep your 3.50% mortgage on $320,000

Option 2: Cash-Out Refi to $420,000 at 6.95%

• New mortgage: $420,000 over 30 years at 6.95%
• Monthly P&I: $2,776
• Closing costs: $10,000–$15,000
• Total monthly payment: $2,776 (about $630 more per month than the HELOC scenario)

The HELOC wins by approximately $630 per month — over $7,500 per year — for as long as the draw period lasts. On a 10-year draw, that's $75,000+ in cash flow advantage. The cash-out refi is the wrong answer here.

This pattern is dominant for anyone who locked in a sub-5% mortgage during 2020–2022. Roughly 60% of US mortgages are at rates below 4.5%; for those borrowers, the cash-out refi is almost always the wrong choice. The HELOC preserves the asset they have — a below-market fixed-rate mortgage.

Scenario B: You Have a 6.5% Mortgage From 2024

You bought in 2024 when rates were elevated. Your current mortgage:

• Balance remaining: $380,000
• Rate: 6.50%
• Monthly P&I: $2,402
• Remaining term: 28 years

Option 1: HELOC for $100,000

• HELOC rate: 8.20%
• Monthly HELOC interest (draw period): $708
• Original mortgage payment: $2,402 (unchanged)
• Total monthly payment: $3,110

Option 2: Cash-Out Refi to $480,000 at 6.95%

• New mortgage: $480,000 over 30 years at 6.95%
• Monthly P&I: $3,172
• Closing costs: $12,000–$18,000
• Total monthly payment: $3,172

The HELOC and the cash-out refi land within $62 per month of each other. The decision is no longer obvious — it depends on secondary factors:

• Rate volatility risk: The HELOC is variable. If the Fed raises rates, your HELOC rate rises with Prime. The cash-out refi locks the rate for 30 years. If you believe rates will rise significantly, the cash-out refi looks better.
• Payment volatility risk: The HELOC requires interest-only payments during draw period, then jumps when amortization begins. The cash-out refi is steady throughout. If you want predictability, cash-out wins.
• Closing costs: Cash-out refi has $12,000–$18,000 of closing costs upfront. The HELOC has near-zero. On a $100,000 borrowing, that's a 12–18% effective fee on the cash-out — significant.

For most readers in Scenario B, the HELOC is still slightly favored, because the closing-cost differential is large. But the case is much closer than Scenario A.

Scenario C: You Have a 7.2% Mortgage From Late 2023

You bought at the worst possible time on rate. Your current mortgage:

• Balance remaining: $390,000
• Rate: 7.20%
• Monthly P&I: $2,651
• Remaining term: 28 years

Option 1: HELOC for $100,000

• HELOC rate: 8.20%
• Monthly HELOC interest (draw period): $708
• Original mortgage payment: $2,651 (unchanged)
• Total monthly payment: $3,359

Option 2: Cash-Out Refi to $490,000 at 6.95%

• New mortgage: $490,000 over 30 years at 6.95%
• Monthly P&I: $3,238
• Closing costs: $12,000–$18,000
• Total monthly payment: $3,238

The cash-out refi wins by $121 per month — about $1,450 per year. Over 30 years, that's $43,500 in cumulative savings even after closing costs.

The reason: the existing mortgage rate (7.20%) is higher than the cash-out refi rate (6.95%). The borrower benefits from refinancing the existing balance to the lower rate, on top of accessing the equity.

For borrowers with mortgages above approximately 6.75–7.0%, the cash-out refi often wins because the rate-and-cash-access combination is genuinely better than the alternative. This is the only scenario where the cash-out refi consistently makes sense.

The Pattern: When Each One Wins

The three scenarios reveal the structural pattern:

The pattern holds because the HELOC adds new debt while leaving the existing mortgage untouched, while the cash-out refi replaces both with one new loan at today's rate. The lower your existing rate relative to today's market, the more valuable your existing mortgage is — and the more harmful the cash-out refi becomes.

The rough threshold where the cash-out refi catches up to the HELOC is when your existing rate is within 25–50 basis points of the new cash-out rate. At today's cash-out refi rate of 6.72%, that means existing mortgages above approximately 6.5%.

The Variables That Change the Math

The above analysis assumed standard conditions. Several factors can shift the answer:

How Long Will You Keep the Home?

If you plan to sell within 3–5 years, the closing costs of a cash-out refi become a much larger percentage of effective cost. A $15,000 closing cost on a $100,000 draw is 15%; over 5 years, that's 3% per year in amortized cost. The HELOC's near-zero closing cost wins decisively for short holds, even when the cash-out refi looks attractive otherwise.

If you plan to stay 15+ years, the closing cost amortizes over a long enough period that the impact softens.

What's the Plan for the Borrowed Money?

If the $100,000 is for a one-time use (home renovation, business launch, large purchase), either product works. The HELOC offers slightly more flexibility — you can draw less if costs come in below estimate.

If the $100,000 is for ongoing access over years (a draw-as-needed strategy for college tuition, medical expenses, or business cash flow), the HELOC is structurally superior. You only pay interest on the amount drawn, and you can pay back and re-borrow.

What's Your Risk Tolerance on Rate Increases?

The HELOC's variable rate is genuinely consequential. If the Fed raised rates back to 5.5% (from today's 3.75% target), HELOC rates would likely move to 9.5–10.5%. On $100,000 drawn, that's $158 per month more in interest than current rates.

A cash-out refi at a fixed rate eliminates this risk. For borrowers near payment-burden limits, the predictability is worth meaningful cost.

Are You Planning to Pay It Down Quickly?

If you expect to repay the $100,000 within 3–5 years (from a bonus, asset sale, or income increase), the HELOC's interest-only structure during draw period works in your favor. You pay only the interest you accrue, and you can repay principal as cash arrives.

A cash-out refi locks you into amortizing payments and a 30-year term. Paying it off early is allowed but means a significant amount of principal accumulates during normal payments.

Other Options to Consider

Home Equity Loan (Not a Line)

A home equity loan is a fixed-rate, fixed-term second lien — essentially a cash-out refi structure applied to a second mortgage. Rates today are approximately 8.20%, slightly higher than a HELOC's current rate but with rate fixed for the life of the loan.

Best for: borrowers who want a fixed rate on the new debt without giving up their low-rate primary mortgage. Functionally similar to a HELOC but without the variable rate risk.

Personal Loan

For draws under $50,000, an unsecured personal loan from SoFi, LightStream, or Upgrade can be competitive. Rates today are typically 8–14% for 700+ credit borrowers — comparable to a HELOC for shorter terms. The upside: no lien on your home; the downside: shorter terms (typically 3–7 years) and higher monthly payments.

For $100,000, personal loan rates and terms become less competitive. The home-equity-secured options usually win.

Reverse Mortgage (Age 62+)

For homeowners 62 and older, a Home Equity Conversion Mortgage (HECM) can convert equity into cash with no required monthly payments. The product has significant complexity, fees, and impact on heirs. It's the right answer for a specific subset of older homeowners and not appropriate for most readers.

The Mistakes That Cost the Most

Cash-out refinancing a sub-5% mortgage. The single most expensive mistake in home-equity decisions. A homeowner with a 3.5% mortgage who cash-out refis to 6.95% on the entire balance pays approximately $700–$1,000 more per month than necessary — for the entire life of the new loan. Over 30 years, this is six-figure cost.

Treating HELOC interest as deductible without verifying use. Under current tax law, HELOC interest is deductible only if the funds are used to buy, build, or substantially improve the home that secures the loan. Using HELOC funds for debt consolidation, education, or other purposes makes the interest non-deductible. Many borrowers and lenders still operate on outdated assumptions.

Ignoring the HELOC repayment shock. The HELOC's interest-only payment during the draw period (years 1–10) is small. When the draw period ends, the loan amortizes over the remaining term (typically 10–20 years), and the monthly payment can double or triple. Planning for this transition is critical; most readers don't.

Underestimating cash-out refi closing costs. Online quotes often show only the rate, not the closing costs. On a $400,000 cash-out refi, $12,000–$18,000 in costs is normal but feels surprising in the closing documents. Always get a full Loan Estimate before committing.

The Decision in One Question

The HELOC vs cash-out refi decision can usually be resolved by answering one question:

"What rate is my current mortgage?"

If the answer is below 5%, the HELOC is the right choice in nearly every scenario. Keeping the existing mortgage is the single most valuable financial decision available to you, and the cash-out refi destroys it.

If the answer is 5%–6.5%, the math gets closer. Run the specific numbers for both options. Consider your time horizon, rate-volatility tolerance, and use of the borrowed funds.

If the answer is above 6.75%, the cash-out refi often wins. Today's rate environment is essentially a one-time chance to refinance and access cash simultaneously.

In all scenarios, the absolute rate on the $100,000 of new debt matters less than what happens to the existing mortgage. Most borrowers get this backwards when they shop — they focus on the cash-out refi rate without comparing it to what they already have.

This guide is general information, not personalized financial advice. Specific rate quotes, closing costs, and tax treatment vary by lender and borrower situation. Get full Loan Estimates from multiple lenders before committing to either product. Consult a tax professional regarding deductibility of interest on any home-equity-secured debt.