HELOC vs cash-out refi? What's the real cost difference over time?

What's the real cost difference between a HELOC and cash-out refi?

You're weighing a HELOC against a cash-out refinance and want to understand how costs stack up over time. Both options tap your home's equity, but the cost structures work differently. A HELOC typically has lower upfront costs—often just an appraisal and minimal fees—but carries a variable interest rate that can change monthly or annually. Cash-out refinancing usually involves higher closing costs (similar to your original mortgage) but locks in a fixed rate for the loan term. The math depends on how long you need the money and what happens to interest rates. HELOCs often start with lower rates, but if rates climb, your payments increase. Cash-out refis protect against rate increases but cost more upfront.

Compare the total projected costs: add up closing costs plus interest payments over your expected timeline. Many people run scenarios for different rate environments—stable, rising, or falling rates. Your lender can provide specific numbers for both options based on your home value, existing mortgage balance, and credit profile.