Home equity borrowing comparison
Home Equity Line of Credit vs. Home Equity Loan vs. Cash-Out Refinance
Compare three ways to access home equity without overlooking the cost of replacing an existing mortgage that may have a very different interest rate.
Current mortgage and cash needed
A home equity line of credit (HELOC) and a home equity loan generally leave the current first mortgage in place. A cash-out refinance replaces it with a new, larger first mortgage.
Home equity loan
Modeled as a separate fixed-rate installment loan that leaves the current first mortgage unchanged.
Home equity line of credit
Modeled as one full draw today, interest-only payments during the draw period, then amortizing payments during repayment.
Cash-out refinance
Modeled as a new fixed-rate first mortgage equal to the current mortgage balance plus the cash you want.
Results will appear after valid values are entered.
Current mortgage baseline
The added-cost comparison starts with what the current mortgage would cost over the selected period if you did not replace it.
Compare the three borrowing structures
“Added financing cost” means modeled interest and upfront costs above the interest the existing mortgage would have generated during the same period. It is not a qualification test or a recommendation.
| Option | Modeled monthly payment now | Interest + upfront costs | Added financing cost vs. keeping first mortgage | Home-secured debt after comparison |
|---|---|---|---|---|
| Home equity loan | — | — | — | — |
| Home equity line of credit | — | — | — | — |
| Cash-out refinance | — | — | — | — |
What changes between the options
- Home equity loan: keeps the existing first mortgage and adds a separate installment loan.
- Home equity line of credit: keeps the existing first mortgage and adds revolving credit secured by the home. The model assumes the entire entered amount is drawn immediately.
- Cash-out refinance: replaces the existing first mortgage. The new rate therefore applies to both the old mortgage balance and the additional cash borrowed.
The calculator uses nominal annual interest rates divided by 12 for monthly loan calculations. It does not model taxes, homeowners insurance, mortgage insurance, escrow, tax treatment, qualification, lender limits, prepayment penalties, future rate changes, or closing costs financed into a loan.
Real HELOCs vary. The Consumer Financial Protection Bureau notes that HELOCs usually have variable rates, may have different minimum-payment rules during the draw period, and can produce significantly higher payments when repayment begins.
For educational purposes only. This simplified comparison assumes a fixed-rate current mortgage, fixed-rate home equity loan, constant HELOC rate, one full HELOC draw at the start, and a fixed-rate cash-out refinance. Actual rates, payment rules, fees, underwriting, property-value limits, and loan terms can differ. Review the Calculator Methodology for shared assumptions, rounding, payoff timing, and privacy-conscious analytics details.