HELOC vs. cash-out refinance: which one fits your situation

If you’ve built up equity, you generally have two ways to access it: a home equity line of credit (HELOC), or a cash-out refinance that replaces your existing mortgage. They solve the same problem differently.

Cash-out refinance

You replace your current mortgage with a new, larger one and take the difference in cash. This resets your rate and term — worth it if today’s rates are close to or better than what you already have.

HELOC

A HELOC sits on top of your existing mortgage as a separate, often variable-rate line of credit. It leaves your original mortgage untouched, which matters if you locked in a rate well below today’s market.

How to decide

• Keeping a great existing rate? A HELOC avoids disturbing it.
• Your current rate is higher than today’s? A cash-out refinance may improve both your rate and give you cash.
• Need funds gradually, like for a renovation in phases? A line of credit is more flexible than a lump sum.

The math depends entirely on your current rate, balance, and how you plan to use the funds — a generic comparison can only take you so far.