If you’re a homeowner needing extra funds for home improvements, debt consolidation, or investments, you may be considering a cash-out refinance or a home equity line of credit (HELOC). While both let you tap into your home’s equity, they work differently.

Cash-Out Refinance

A cash-out refinance replaces your current mortgage with a new one, allowing you to borrow more than what you owe and take the difference in cash.

• Best for: Large expenses like renovations or consolidating high-interest debt.
• Pros: Potentially lower interest rates than credit cards or personal loans, structured monthly payments.
• Cons: Closing costs apply, and you’re resetting your mortgage term.

HELOC (Home Equity Line of Credit)

A HELOC is a revolving credit line secured by your home’s equity. You can borrow as needed, similar to a credit card.

• Best for: Flexible, ongoing expenses or emergency funds.
• Pros: Borrow only what you need, interest-only payment options.
• Cons: Variable interest rates, possible risk of overspending.

Which One Should You Choose?

If you need a large lump sum, a cash-out refinance may be ideal. If you prefer access to funds over time, a HELOC might be a better fit. Speaking with a mortgage expert can help you decide which option aligns with your financial needs.