Need to borrow against your home? Compare keeping your current mortgage and adding a HELOC with replacing the whole mortgage through a cash-out refinance. See monthly payments now and after the draw period, closing costs, interest and fees over the years you plan to keep the loans, and the HELOC rate at which the answer flips.
Last updated:
Your home & mortgage
$
$
%
years
$
How long you expect to keep the loans
Option 1: keep mortgage + HELOC
%
Variable: usually prime + a margin
$
years
years
Option 2: cash-out refinance
%
% of loan
Often 2%-6% of the new loan
Enter your values to see the result.
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How to use the HELOC vs Cash-Out Refinance Calculator
Enter your home value, current mortgage balance, rate and years left.
Enter the cash you want and how many years you expect to keep the loans.
Fill in the HELOC terms: rate, fees, draw and repayment periods and how you'll repay it.
Fill in the refinance terms: rate, term and closing costs, and whether they're rolled into the loan.
Press Compare HELOC vs refinance to see payments, total cost and the break-even HELOC rate.
How the comparison works
HELOC route: your current mortgage payment continues unchanged; the HELOC adds interest-only payments (balance × rate ÷ 12) during the draw period, then a fully amortizing payment over the repayment period.
Cash-out refinance: new loan = current balance + cash (+ closing costs if rolled in); payment = L × i ÷ (1 − (1 + i)−n).
Cost over your time frame = payments + upfront fees + debt still owed − amount originally borrowed (mortgage balance + cash). That equals interest plus fees, measured the same way for both.
Break-even HELOC rate = the HELOC rate that makes both costs equal over your time frame.
Example: a $250,000 mortgage at 3.5% with 25 years left, plus $60,000 needed. A HELOC at 8.25% makes the monthly total $1,664.06; a 6.5% 30-year cash-out refinance with 3% closing costs rolled in is $2,018.19. Over 10 years the HELOC route costs about $77,600 less because the low-rate mortgage is kept.
HELOC vs cash-out refinance at a glance
HELOC
Cash-out refinance
What changes
Adds a second loan; first mortgage untouched
Replaces the whole mortgage
Rate
Usually variable (prime + margin)
Usually fixed
Closing costs
Low; sometimes waived
Typically a few percent of the new loan
How you get money
Draw as needed, pay interest only on what you use
One lump sum at closing
Payments
Can be interest-only, then rise
One steady principal + interest payment
Best when
Existing rate is low; smaller or short-term needs
Rates are similar or lower; large, long-term needs
Tips before you borrow against your home
Use a realistic time frame. The cheaper option often flips between 3 and 15 years; pick how long you'll really keep the loans.
Stress-test the HELOC rate. Compare the break-even rate with today's rate to see how much the prime rate could rise.
Plan for the payment jump at the end of an interest-only draw period.
Watch the term reset. A new 30-year refinance lowers the payment but can add years of interest.
Your home is the collateral. Only borrow what you can repay, since falling behind can put the home at risk.
Frequently asked questions
What is the difference between a HELOC and a cash-out refinance?
A HELOC is a second loan, a revolving line of credit secured by your home, that sits on top of your existing mortgage. A cash-out refinance replaces your mortgage with a new, larger one and pays you the difference in cash, so your whole balance moves to the new rate.
When is a HELOC better than a cash-out refinance?
Usually when your current mortgage rate is well below today's refinance rates, when you need a smaller amount, or when you'll repay the money within a few years. Refinancing would reprice your entire mortgage to a higher rate, while a HELOC charges the higher rate only on the new money.
When is a cash-out refinance better?
When current refinance rates are close to or below your existing mortgage rate, when you need a large sum for a long time, or when you want a fixed rate instead of a variable HELOC rate. Closing costs are higher, so it works best if you'll keep the loan for many years.
How do you compare the total cost fairly?
Add all payments and upfront fees over the same time frame, add the debt still owed at the end, and subtract the amount originally borrowed. What remains is the interest and fees each option cost. With a $250,000 mortgage at 3.5% plus $60,000 needed, a HELOC at 8.25% costs about $125,000 over 10 years versus about $203,000 for a 6.5% cash-out refinance.
What is the break-even HELOC rate?
It is the average HELOC rate at which both options cost the same over your time frame. HELOC rates are usually variable, so if the break-even is far above today's rate, you have a cushion against rate increases; if it's close, the refinance's fixed rate may be safer.
Why does the HELOC payment jump later?
Many HELOCs allow interest-only payments during a draw period, often 10 years. When the repayment period starts, you must repay principal too, so the payment rises. In the default example it goes from $412.50 to $511.24 a month.
How much can I borrow against my home?
Lenders limit the combined loan-to-value (all mortgage debt ÷ home value). Many cash-out refinances cap at 80%, and many HELOC lenders allow around 80% to 90%. The calculator shows the CLTV for each option.
Are all the tools on FreeToolCabin tested for quality and accuracy?
Yes! Every tool on our site undergoes automated Q/A testing in real browser environments to ensure high precision, correct output, and zero errors. If you happen to spot a bug or have a suggestion, please contact us at [email protected] and our team will review it right away.