Refinance vs. HELOC
Compare cash-out refinance and HELOC side-by-side. Get personalized recommendations based on your situation.
🏦 HELOC Recommended
HELOC has significantly lower total cost
Cash-Out Refinance
Replace your mortgage + get cash
New Monthly Payment
$2,151
↑ $125 vs. current
Closing Costs
$8,750
2.5% of loan amount
Total Interest
$415,570
Over 30 years
New Loan Amount
$358,750
LTV: 71.8%
HELOC
Keep mortgage + add credit line
Draw Period Payment
$2,380
Mortgage + HELOC interest-only
Repayment Period Payment
$2,460
Mortgage + HELOC principal & interest
Total Interest
$96,639
On HELOC only
Closing Costs
$0 - $500
Minimal fees
Break-Even Period
3.2
years
Monthly Difference
$229
Refinance saves
Total Cost Difference
$19,994
HELOC cheaper
What this means: Moderate break-even period. Refinancing makes sense if you'll stay 5+ years.
Pros
- ✓Lower interest rate than current mortgage
- ✓Fixed rate - payment won't change
- ✓Single monthly payment
- ✓Interest may be tax deductible
Cons
- ✗High closing costs: $8,750
- ✗Extends loan term - more interest over time
- ✗Replaces your existing mortgage
- ✗Lengthy approval process
Pros
- ✓Low or no closing costs
- ✓Keep your current low mortgage rate
- ✓Only pay interest on what you use
- ✓Flexible access to funds during draw period
- ✓Fast approval process
Cons
- ✗Variable rate - payment can increase
- ✗Higher payment during repayment period
- ✗Two separate monthly payments
- ✗Payment shock when draw period ends
- ✗Rate could increase over time
Typical: 2-5% of loan amount
Making the Right Choice
Choosing between a cash-out refinance and a HELOC depends on your specific financial situation, goals, and how long you plan to stay in your home.
Key Considerations:
- Current Interest Rate: If your current mortgage rate is significantly higher than current rates, refinancing might save you money even with closing costs.
- How Long You'll Stay: Refinancing makes more sense if you'll stay long enough to recoup closing costs through monthly savings.
- Amount Needed: HELOCs are often better for smaller amounts where closing costs would be disproportionate.
- Payment Flexibility: HELOCs offer more flexibility but come with variable rates and payment changes.
- Rate Stability: Refinancing locks in a fixed rate, while HELOCs typically have variable rates that can increase.
Important Factors
- Break-even period: How long to recoup refinance closing costs
- Total cost over time: Not just monthly payment
- Rate risk: Variable HELOC rates vs. fixed refinance rates
- Flexibility: HELOC allows borrowing as needed
Need Expert Guidance?
Connect with a HELOC expert who can help you evaluate both options and choose the best path for your financial goals.
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