Home Equity Guide

Unlocking Your Home Equity: HELOC vs. Home Equity Loan vs. Cash-Out Refinance

Compare three common ways to access your home equity, and learn which option may be right for your goals.

By Julie Linh Harrill 8 min read 2,167 views

A home behind three display blocks labeled HELOC, Home Equity Loan and Cash-Out Refinance

Quick Facts: Your Home Equity Options

  • Flexible Access

    HELOC: borrow as needed during the draw period.

  • Fixed Rate

    Home equity loan: a lump sum with predictable payments.

  • New Loan

    Cash-out refinance: a larger loan replaces your mortgage.

  • Your Home

    All three options use your home as collateral.

Compare the Options

Each home equity option works differently. This table gives you a quick overview of how they compare.

HELOC, home equity loan, and cash-out refinance compared by loan structure, interest rate type, access to funds, repayment, effect on your first mortgage, and closing costs
Feature Home Equity Line of Credit (HELOC) Home Equity Loan Cash-Out Refinance
Loan Structure Revolving line of credit Fixed lump-sum loan New mortgage replacing the existing loan
Interest Rate Type Usually variable Usually fixed Fixed or adjustable
Access to Funds Draw as needed during the draw period One-time lump sum at closing Lump sum at closing
Repayment Terms Draw and repayment periods; terms vary by lender Monthly payments over a set term, usually fixed Monthly payments over a new mortgage term
Impact on Your First Mortgage Usually remains in place Usually remains in place Replaces your existing mortgage entirely
Closing Costs Low to moderate (varies by lender) Low to moderate (varies by lender) Typically higher, often 2%–5% of the loan amount

Home Equity Line of Credit (HELOC)

Borrow What You Need, When You Need It.

Flexible

  • Revolving line of credit secured by your home
  • Pay interest on the amount you draw
  • Usually a variable interest rate
  • Good for ongoing or unpredictable costs
Learn more about HELOCs

Home Equity Loan

A Lump Sum with Predictable Payments.

Fixed Rate

  • Receive a single lump sum at closing
  • Usually a fixed interest rate
  • Keep your existing first mortgage
  • Good for large, planned expenses
Learn more about home equity loans

Cash-Out Refinance

Access Your Equity Through a New Loan.

New Mortgage

  • Replace your current mortgage
  • Receive cash at closing
  • Fixed or adjustable rate options
  • The new rate applies to your entire loan balance
Learn more about cash-out refinance

Financing Home Improvements

Match Your Funding to Your Project.

Renovations

  • A HELOC for projects with changing costs
  • A home equity loan for a fixed budget
  • Consider total costs and timeline
  • Plan for unexpected expenses
Explore renovation financing options

Using Equity for Other Financial Goals

Understand the Risks Before Borrowing.

Plan Ahead

  • May be used for debt consolidation, business needs, or investments
  • Compare total borrowing costs
  • Borrow only what you can comfortably repay
  • Your home is at risk if you can’t make payments
Estimate payments with our calculators

Choosing the Right Option

The Best Choice Depends on Your Situation.

Your Goals

  • Review your current mortgage and equity
  • Compare rates, fees, and repayment terms
  • Consider your short- and long-term goals
  • Talk with a qualified mortgage professional
Find the right option for you

Was this article helpful?

The Bottom Line

Your home equity can be a valuable financial resource, whether you’re planning a home improvement, paying off higher-interest debt, or reaching other financial goals. A HELOC offers flexibility, a home equity loan provides a lump sum with predictable payments, and a cash-out refinance lets you access equity through a new mortgage. The right option depends on your needs, your current mortgage, and your long-term plans.

Let’s Connect

Get personalized guidance for your home equity goals.

This article is for general educational purposes only and isn’t a commitment to lend or an offer of credit. Loan programs, rates, fees, and eligibility vary by lender and borrower and may change without notice. Talk with a licensed loan officer about your situation.