Home equity line vs. cash-out refinance: what's the difference?
Two ways to access equity. Different costs, structures, and trade-offs.
A HELOC is a separate line of credit secured by your home. A cash-out refinance replaces your existing mortgage with a larger mortgage, and you receive the difference after costs and payoffs.
With a HELOC, you can usually draw funds as needed during an initial period. Rates are often variable, and the payment structure can change when the draw period ends.
A cash-out refinance gives you a lump sum and changes the terms on your entire mortgage balance. If your current mortgage has a favorable rate, replacing it could increase borrowing costs significantly.
Compare the annual percentage rate, lender fees, closing costs, repayment schedules, and total interest. Ask lenders for written offers under consistent assumptions and review the effect of extending your loan term.
Both options use your home as collateral and carry foreclosure risk if you cannot repay. Eligibility depends on the provider’s review. Consider your budget and goals, and seek qualified advice when needed.
For general educational purposes only. This is not personalized financial, insurance, or legal advice.