Quick answer
- Who it may fit
- Owners with equity seeking a larger lump sum and willing to replace the first mortgage.
- Equity & closing costs
- Cash received is limited by equity and loan rules; compare closing costs and the entire replacement loan.
- Insurance & fees
- The new loan has closing costs; insurance and pricing depend on its terms and loan-to-value.
- Key eligibility
- Equity, credit, income, property and possible seasoning requirements apply.
- Main tradeoff
- Replacing a favorable first-mortgage rate may cost more; the home secures the debt.
Down payment is not total cash to close. Educational guidance pending licensed review.
Sources: CFPB: equity loan choices
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HELOC vs. cash-out refinance
Scroll sideways to read the full comparison table.
| Compare | HELOC | Cash-out refinance |
|---|---|---|
| First mortgage | A second lien can keep it in place | Replaces it with a larger mortgage |
| Funds | Draw as needed up to the line limit | Lump sum at closing |
| Rate | Usually variable; payments can change | Fixed-rate structures often available; compare whole-loan rate |
| Repayment | Payment may rise after draw period ends | New term and amortization may change total interest |
| Fees & total cost | Check opening, annual and closing fees | Compare closing costs and payment on the entire new mortgage |
| Collateral risk | Home secures the line; nonpayment can lead to foreclosure | Home secures the new loan; nonpayment can lead to foreclosure |
Program terms vary by borrower and lender. Down payment is not total cash to close. Educational guidance pending licensed review.
Sources: CFPB: HELOCs · CFPB: equity loan choices
A cash-out refinance replaces your current mortgage with a larger one and returns the difference to you at closing. It suits larger, one-time needs. If your existing first mortgage carries a rate you would rather keep, a second-lien option is usually the better conversation.
- Owners funding a large project or a one-time expense
- Owners consolidating higher-cost debt into a single secured payment
- Owners who would be refinancing the first mortgage anyway
- One loan and one payment rather than a second lien
- Fixed-rate structures are widely available
- Funds are received as a lump sum at closing
- Replacing a low existing first-mortgage rate can be expensive — compare against a second lien first
- Cash-out pricing is typically higher than rate-and-term pricing
- Equity is reduced, and secured debt carries your home as collateral
- Maximum loan-to-value varies by program, occupancy and property type
These are the factors an underwriter typically reviews. They are not a checklist of requirements, and meeting them does not guarantee eligibility or approval.
- Equity above the program's cash-out threshold
- Credit, income and asset review
- An acceptable property and appraisal
- Seasoning requirements may apply
All loans are subject to credit, income, property and underwriting approval. Nothing on this page is a loan offer, an approval, a rate lock or a commitment to lend. Programs, rates and terms are subject to change without notice.