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How do I compare HELOC vs cash-out refi using total cost and rate structure?
Key Takeaways
- HELOCs have lower upfront costs but variable interest rates.
- Cash-out refis have higher closing costs but fixed rates on the full loan.
- Total cost depends on how much you borrow and your timeline.
How do I compare HELOC vs cash-out refi costs?
You want to compare a HELOC against a cash-out refinance to see which option costs less and works better for your situation. Both let you access your home's equity, but they work differently and have different cost structures.
A HELOC typically has lower upfront costs—often just an appraisal fee and minimal closing costs. The interest rate starts variable and applies only to what you borrow. A cash-out refinance replaces your entire mortgage with a new, larger loan at a fixed rate, but comes with full closing costs (typically 2-3% of the new loan amount).
Compare the total costs by looking at upfront fees, ongoing interest rates, and how long you plan to use the funds. Calculate what you'd pay in interest on a HELOC's variable rate versus the fixed rate on a cash-out refi over your expected timeline. Also check the payment structures—HELOCs often have interest-only periods followed by principal and interest payments.
Get quotes from lenders for both options and ask for detailed cost breakdowns. Share your specific goals and timeline with the lender, and they can walk you through the numbers for each scenario.
About the Author
Dan Green
20-year Mortgage Expert
Dan Green is a mortgage expert with over 20 years of direct mortgage experience. He has helped millions of homebuyers navigate their mortgages and is regularly cited by the press for his mortgage insights. Dan combines deep industry knowledge with clear, practical guidance to help buyers make informed decisions about their home financing.
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