Refinancing & rates

Cash-Out Refinance vs. Home Equity Loan: Which Costs Less?

Both turn equity into cash. One replaces your mortgage; the other sits behind it. That single structural difference drives every other trade-off.

The side-by-side

  • Cash-out refinance: one loan, one payment, lower rate, higher closing costs, resets your term and your first-mortgage rate.
  • Home equity loan: second loan, second payment, higher rate, lower closing costs, leaves your existing mortgage rate alone.
  • HELOC: a revolving line at a variable rate, best when you need money in stages rather than all at once.

The deciding question

Ask what rate your current mortgage carries. If today's refinance rates are at or below it, the cash-out refinance usually wins. If your existing rate is well below market, keeping it and adding a second loan is almost always cheaper.

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Frequently asked

A home equity loan, typically. Some lenders waive the fees entirely, while a cash-out refinance runs 2–5% of the new loan amount.

Not at the same time on the same equity. Combined balances still have to stay within the lender's maximum loan-to-value limit.

Part of The Homeowner's Guide to Home Equity.

More on refinancing & rates

Cash-Out Refinance: How to Take Cash Out of Your Home

How a cash-out refinance works, how much cash you can take out of your home, what it costs, and when it beats a HELOC.

Cash-Out Refinance Rates: What Drives Your Number

What cash-out refinance rates depend on, how they compare with regular refinance rates, and how to get a low rate on your cash-out.

How to Compare Mortgage Refinance Rates the Right Way

A practical way to compare mortgage and refinance rates across lenders: APR, points, credit, and lock periods — so you can spot the genuinely low rate.