How this cash-out refinance vs HELOC calculator works
Both paths hand you the same cash; they just charge for it very differently. Path A — the cash-out refinance — pays off your current mortgage and replaces it with one new, larger loan (your balance plus the cash) at today's rate and a fresh term. Path B keeps your existing mortgage exactly as it is and adds a HELOC for the cash: interest-only payments during the draw period, then full principal-and-interest over the repayment period, on top of your unchanged mortgage payment. The calculator amortizes all three loans month by month and shows each path's total monthly payment over time and lifetime interest.
The two bars above the chart are deliberately drawn in the same visual language as our HELOC payment calculator: segment width is how long a phase lasts, height is how much you pay per month. The refi bar is one flat block — that's its pitch, one fixed payment forever. The HELOC path is a staircase: lower now, a step up when the draw ends, a step down when your original mortgage retires. Neither shape is automatically better; the question is what the whole staircase costs versus the whole block.
The mechanic that decides it: repricing everything vs. pricing the new money
A cash-out refinance doesn't just borrow your $60,000 of cash at today's rate — it reprices your entire existing balance at today's rate too. If you're holding a 3.5% mortgage from years past and today's refi rate is 6.5%, the refi quietly adds three points to $300,000 of debt that was already fine, as the price of admission for the cash. The HELOC path leaves the cheap mortgage untouched and pays a higher rate — but only on the new $60,000.
The fastest sanity check is the blended rate:
Blended rate = (balance × current rate + cash × HELOC rate) ÷ (balance + cash)
At the defaults that's (300,000 × 3.5% + 60,000 × 8%) ÷ 360,000 ≈ 4.25% — against a 6.5% refi on the same total debt. When the blend is well below the refi rate, the HELOC path wins on cost even though its sticker rate is the highest number on the page. When today's refi rates are at or below your current rate, the logic flips completely: the refi reprices your whole loan downward, and it's usually the better tool. That single comparison — your current rate versus today's — does most of the deciding.
Closing costs: the quiet thumb on the scale
This calculator's totals exclude closing costs, and that omission flatters the refi. A cash-out refinance re-originates your entire mortgage, with costs typically running 2–5% of the new loan — $7,000 to $18,000 at the defaults — in origination fees, appraisal, title, and escrow. HELOCs are famously cheap to open: many lenders charge little or nothing upfront, with perhaps a modest annual fee and an early-closure fee if you terminate the line within a few years. If the interest math between the paths is close, closing costs usually break the tie toward the HELOC. If you do refinance, resist rolling the costs into the loan without doing the math — financed closing costs compound at mortgage rates for decades.
Fixed vs. variable: what you're really choosing
The refi's flat bar hides its best feature: certainty. Every payment is known to the dollar for the full term, immune to whatever the Federal Reserve does. The HELOC path carries two uncertainties: the variable rate — nearly all HELOCs float on prime plus a margin, so the payment you see here is a snapshot, not a promise — and the built-in payment shock when interest-only draws convert to amortizing repayment. This calculator holds the HELOC rate constant and flags the shock explicitly; before committing, re-run the comparison with the HELOC rate two points higher and make sure the staircase still fits your budget. If you want the HELOC's structure without the rate risk, a fixed-rate home equity loan sits in between: lump sum, fixed rate, no draw period, first mortgage untouched.
When each path makes sense
The HELOC path usually wins when your current mortgage rate is meaningfully below today's rates — the common case for anyone who bought or refinanced in a low-rate era. You protect the cheap debt, pay premium rates only on the slice of new money, and skip most closing costs. The cash-out refi usually wins when today's rates are at or below your current rate, when you need more cash than HELOC combined-LTV limits allow, when you're consolidating into one predictable payment, or when variable-rate exposure genuinely doesn't fit your life. And if the reason you're tapping equity is a payoff strategy rather than a purchase, run the mortgage extra-payment calculator first — sometimes the best use of surplus cash flow is making the equity question moot.
Frequently asked questions
Which is better — cash-out refi or HELOC?
Usually whichever avoids repricing cheap debt. Current rate below today's rates → HELOC path protects it. Current rate at or above today's → the refi reprices you downward and takes the lead. The blended-rate check settles most cases.
What is a cash-out refinance?
A new, larger mortgage that pays off your old one and hands you the difference in cash. One loan, one fixed payment — but your entire balance moves to today's rate and a restarted term.
What's the blended rate comparison?
Weight your current rate by your balance and the HELOC rate by the cash: that's the average rate of the keep-it path. Compare it to the refi rate on the same total debt. Lower blend wins on cost.
How do closing costs differ?
Refi: 2–5% of the whole new loan ($7k–$18k at the defaults). HELOC: often near zero upfront, maybe a small annual fee. Not modeled in the totals here — mentally add them to the refi side.
Are HELOC rates fixed?
Almost never — they float on prime plus a margin. This page holds the rate constant as a snapshot; stress-test 2 points higher. Some lenders offer fixed-rate locks on drawn balances.
Does a refi reset my mortgage clock?
Yes. A fresh 30-year term restarts amortization at the interest-heavy end, on a bigger balance. Matching the refi term to your remaining years (e.g., 25) avoids stretching the debt, at a higher payment.
How much equity can I actually tap?
Cash-out refis generally cap at 80% loan-to-value; HELOCs typically allow 80–90% combined LTV depending on lender and credit. The calculator warns when your inputs breach typical limits.
What about a home equity loan instead?
The fixed-rate middle path: lump sum, fixed payments from day one, first mortgage untouched, no payment shock. Often the right answer for a single known expense. Approximate it here with a 1-year draw period.
Is the interest tax-deductible?
Only for funds that buy, build, or substantially improve the home, under the $750k combined-debt cap, and only if you itemize — the same use-of-funds test for both paths. Consolidation and tuition don't qualify.
When does the cash-out refi clearly win?
Rates at or below your current rate, very large cash needs, a strong preference for one fixed payment, or little remaining low-rate interest worth protecting. Then the repricing costs little and buys certainty.
What is the payment shock on the HELOC path?
When the interest-only draw ends, the line converts to principal-and-interest — the staircase's step up, automatic and non-negotiable. The chart and Path B bar size it for you before you sign.
What does this calculator leave out?
Closing costs, HELOC rate movement, annual fees, PMI above 80% LTV, points, and taxes. Total interest covers each path's own life, which can differ in length. Get itemized loan estimates before deciding.
This calculator is for education, not lending or financial advice. Rates, fees, and limits vary by lender and credit profile; HELOC rates are variable and will move. Compare official loan estimates side by side before committing either way.