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Should I get a HELOC or cash-out refinance?

Compare a HELOC to a cash-out refinance to see which option costs less based on your situation, interest rates, and how long you need the funds.

What This Calculator Is

A HELOC versus cash-out refinance calculator compares two ways to access your home equity: a flexible credit line (HELOC) versus refinancing your entire mortgage for a larger amount (cash-out). Each has distinct advantages in different situations, and this calculator shows which costs less over time.

Who This Calculator Is For

Homeowners who need to access substantial equity and want to choose the most cost-effective method, those weighing flexibility against rate certainty, and anyone comparing these options with guidance from a mortgage professional.

When to Use This Calculator

Use this calculator when you need significant funds and own substantial equity, when rates make refinancing attractive, when comparing current mortgage rates to HELOC rates, or when deciding whether flexibility (HELOC) or payment certainty (cash-out) matters more to you.

Inputs

$50,000.00
$250,000.00
4.500%
25
8.500%
6.500%
$6,000.00
10

Results

Better Option

HELOC

HELOC Total Cost$24,391.41
Cash-Out Total Cost$66,794.75
Savings with Better Option$42,403.33

Savings, if any, vary based on consumer credit profile, interest rate availability, and other factors.

Insights

HELOC costs less

HELOC saves $42,403.33 in total costs.

Consider

HELOCs offer flexibility; cash-out provides a fixed rate. Choose based on rate environment and how long you need the funds.

Default rates: Federal Reserve Economic Data (FRED), Freddie Mac Primary Mortgage Market Survey

How HELOC vs Cash-Out Refi Is Calculated

For HELOC, we calculate interest on the amount borrowed at the HELOC rate. For cash-out refinance, we calculate the new mortgage payment, compare to your current payment, and factor in closing costs. Total cost comparison shows which is cheaper.

HELOC: helocMonthlyPayment = standard amortization of cashNeeded at helocRate over repaymentYears; helocTotalCost = helocMonthlyPayment*payments - cashNeeded.
Cash-Out Refi: newBalance = currentMortgageBalance + cashNeeded; cashoutMonthlyPayment = standard amortization of newBalance at cashoutRate over a fixed 30-year term; currentMonthlyPayment = amortization of currentMortgageBalance at currentMortgageRate over currentTermRemaining.
cashoutTotalCost = cashoutClosingCosts + max(0, (cashoutMonthlyPayment-currentMonthlyPayment)*repaymentYears*12).
Recommendation = whichever totalCost is lower.
Where: cashNeeded, currentMortgageBalance, currentMortgageRate, currentTermRemaining, helocRate, cashoutRate, cashoutClosingCosts, repaymentYears.
Assumptions: cash-out refi always re-amortized over a fixed 30 years regardless of currentTermRemaining input; HELOC compared only over repaymentYears window (ignores any cost/benefit beyond that window); monthly compounding; no tax deduction effects.

Key Takeaways

  • •If your current mortgage rate is low, a HELOC preserves that rate on your existing loan
  • •Cash-out makes more sense if you can significantly lower your mortgage rate
  • •Factor in closing costs — they can take years to recoup
  • •HELOCs work better for shorter-term needs; cash-out for long-term
  • •Consider whether you want fixed payments (cash-out) or flexibility (HELOC)

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