With American homeowners sitting on $32 trillion in home equity, tapping that wealth is tempting. But should you use a cash-out refinance or a HELOC? The answer depends on your situation.
Cash-Out Refinance
Best for: Large, one-time expenses. Replaces your entire mortgage with a new, larger loan. Fixed rate and predictable payments.
Example: $300K remaining on mortgage, home worth $500K. Cash-out refi for $400K gives you $100K cash (minus closing costs of ~$4,000).
HELOC (Home Equity Line of Credit)
Best for: Ongoing expenses or uncertain amounts. Works like a credit card secured by your home. Draw what you need, pay interest only on what you use.
- Variable rate (currently 7-9%)
- No closing costs at many lenders
- 10-year draw period, 20-year repayment
Comparison
Choose cash-out refi if: You need a large lump sum AND your current rate is higher than today's rates. Choose HELOC if: You want flexibility, need smaller amounts over time, or have a great existing mortgage rate you don't want to lose.
