Mortgage & Home Equity•Updated 2026 Math
HELOC vs. Cash-Out Refinance Calculator
Compare monthly payments and interest costs using our free HELOC vs cash out refi calculator. Evaluate whether keeping your low primary rate with a second-lien HELOC beats refinancing your entire loan balance.
Recommendation Winner
HELOC is significantly cheaper
By keeping your 3.50% primary mortgage rate on $300,000, the HELOC saves you $X per month during the draw period and $Y over 5 years.
Option A: Cash-Out Refinance
Entire Loan RefinancedNew Monthly Payment$2,442Refinanced total: $381,000
Upfront Closing Costs$6,000
5-Yr Total Paid$152,520
Option B: HELOC + Original Loan
Rate ProtectedMonthly (Draw Period)$1,876Post-Draw Repayment Payment: $2,001
Upfront Fees$500
5-Yr Total Paid$113,060
Financial Horizon Side-by-Side Breakdown
Compare monthly payments, upfront fees, cumulative outlays, and remaining principal balance.
| Metric | Cash-Out Refinance | HELOC Combination | Difference |
|---|---|---|---|
| Monthly Payment (Years 1-10) | $2,442 | $1,876 | Save $566/mo |
| Upfront Out-of-Pocket Fees | $6,000 | $500 | Save $5,500 |
| 5-Year Cumulative Cash Outflow | $152,520 | $113,060 | Save $39,460 |
| Remaining Principal Balance at 5 Yrs | $350,200 | $321,400 | Lower by $28,800 |
Frequently Asked Questions
Fact-checked guidance grounded in blended rate mechanics and cumulative cash outlay analysis.
What is the primary difference between a HELOC and a Cash-Out Refinance?▾
A HELOC (Home Equity Line of Credit) is a 2nd mortgage that acts as a revolving line of credit with variable interest rates, leaving your original 1st mortgage rate untouched. A Cash-Out Refinance replaces your entire existing 1st mortgage with a single new, larger 1st mortgage at current market interest rates.
When is a HELOC better than a Cash-Out Refinance?▾
A HELOC is generally superior if you already hold a low fixed interest rate on your primary mortgage (e.g. 3% to 4%) and only need to borrow a moderate amount of cash. Refinancing your low-rate primary loan into a higher rate would drastically increase your total monthly housing cost.
How do closing costs compare between a HELOC and Cash-Out Refinance?▾
HELOC closing costs are typically minimal ($300 to $1,000, often waived by lenders), whereas Cash-Out Refinances incur standard 1st-mortgage closing costs (typically 2% to 4% of the new total loan amount, or $5,000 to $10,000+).
What is a blended interest rate?▾
A blended interest rate calculates your weighted average interest rate across both your original 1st mortgage and your new HELOC 2nd lien based on their respective loan balances. Comparing your blended rate against a cash-out refinance rate reveals your true financial winner.
Formulas, Rates & Regulatory Assumptions:
- HELOC Structure: Assumes a 10-year interest-only draw period followed by a 20-year principal + interest repayment period. HELOC rates are variable and tied to Prime Rate; calculations use current rate provided.
- Cash-Out Refinance: Computes standard 30-year fixed amortization on the total new loan balance (existing mortgage + cash-out amount + closing costs).
- Disclaimer: Lenders require home equity checks (typically capping total combined loan-to-value at 80%-85%). Check with your lender for exact appraisal requirements and margin terms.