HELOC vs Cash-Out Refinance Calculator
A cash-out refi resets your ENTIRE mortgage rate, not just the new cash
HELOC vs Cash-Out Refinance Calculator
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HELOC: first-year interest on the draw
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existing low-rate mortgage stays untouched
Cash-out refi: extra annual interest vs staying put
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entire balance resets to the new rate
Cheaper option in year one
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Cash-out refi resets your ENTIRE mortgage rate
If your existing mortgage rate is well below current market rates, a cash-out refinance doesn't just add a rate on the new cash — it re-prices your whole existing balance at the new, likely higher, rate. This is the single biggest hidden cost most people miss.
HELOC keeps your good rate, but the draw rate floats
A HELOC leaves your low-rate first mortgage completely untouched and only charges its (usually variable) rate on the amount you actually draw — the tradeoff is a typically higher rate on that piece, and exposure to future rate increases.
The math flips once your existing rate is high
If you're already at a high mortgage rate (or the market has moved down since you bought), a cash-out refi's blended rate can beat a HELOC — always compare using YOUR actual existing rate, not a rule of thumb.
HELOC interest modeled as a simple interest estimate on the drawn amount at the HELOC rate for one year (ignoring any draw-period interest-only structure or later principal amortization). Cash-out refi "extra interest" compares first-year interest on the FULL new balance (existing balance plus cash needed) at the new rate, against what you'd have paid on just your existing balance at your current rate plus the HELOC draw at the HELOC rate — isolating the cost of re-pricing your whole existing balance. Closing costs for a refi (typically 2-5% of loan amount) aren't included and would further favor the HELOC in most cases. Not financial advice.