HELOC vs cash-out refinance
A HELOC adds a second loan and leaves your current mortgage as it is; a cash-out refinance replaces your mortgage with one new, larger loan. If you like the rate on your mortgage now, a HELOC keeps it. If you want one loan and one payment, a refinance may fit better.
Key facts
| Your current mortgage | HELOC: stays as it is. Refinance: paid off and replaced |
|---|---|
| How you get the money | HELOC: draws, as you need them. Refinance: one lump sum at closing |
| Closing steps | HELOC: usually lighter. Refinance: a full mortgage process |
| Rate on a HELOC draw | Fixed for the full term of that draw source |
Both let you use your home's equity. They work in different ways. The big difference is what happens to the mortgage you have now.
Side by side
| HELOC | Cash-out refinance | |
|---|---|---|
| Your current mortgage | Stays as it is | Paid off and replaced |
| What you get | A second loan, a line you draw from | One new, larger mortgage |
| Your current mortgage rate | Kept | Gone, replaced by the new loan's rate |
| How you borrow | Draw what you need, when you need it | One lump sum at closing |
| Closing steps | Usually lighter than a full refinance | A full mortgage process |
When a HELOC can make sense
If your current mortgage has a rate you like, a refinance would give that up. A HELOC leaves the mortgage alone and adds a second loan.
When a refinance can make sense
If you want one loan and one payment, or you want to change the term of your mortgage, a refinance may fit better. It replaces everything with a single new loan.
How to decide
Think about three things:
- What is the rate on your mortgage now, and would you give it up?
- Do you need all the money at once, or over time?
- How long do you plan to stay in the home?
Answer a few questions online and your pre-approval decision comes by text and email.
Questions people ask
Does a HELOC change the rate on my mortgage?
No. The line is a separate second loan. Your first mortgage and its rate stay as they are.
Can I switch from one to the other later?
Often, yes. People sometimes open a line now and refinance later, or the other way round. Which order fits depends on your plans and your numbers.
Which one closes faster?
A HELOC usually has lighter closing steps than a full refinance. The timing for your own case comes to you by text and email.
See what a line on your home could be.
A few questions, a soft credit check only, and your pre-approval decision by text and email.
Check what you can borrow