Three ways to reach the same equity. The one that fits usually comes down to a single question: what is the rate on the mortgage you already have?
A HELOC and a home equity loan are second liens: they sit behind your existing first mortgage and leave its rate and term alone. A cash-out refinance does the opposite — it pays off the first mortgage and reprices the entire balance at today's rate. When your current rate is well below market, that repricing is usually the largest cost in the decision, and it is invisible if you compare quoted rates alone.
Between the two second liens, the difference is shape rather than kind. A HELOC is revolving and typically variable — right when funds are needed in stages, as in a phased renovation. A home equity loan is a fixed lump sum with a fixed payment — right when the amount is known and payment certainty matters more than flexibility.
Qualification is a separate question from structure. If you are self-employed and your returns understate what the business produces, a bank statement path may reach the equity your tax returns will not. If the property is a rental rather than your home, DSCR financing qualifies on the rent instead.
Enter your value, balance, existing rate, and how you intend to use the funds. The tool weighs the cost of giving up your current rate against the cost of a second lien and ranks the options.
Your situation
Varies by program and lender.
For comparison only — not a quote.
Your numbers
Illustrative monthly comparison
Interpretation
Second-lien figures assume a rate 1.50% above the market rate you entered, which is a placeholder for illustration rather than a quote. Actual second-lien pricing depends on credit, combined loan-to-value, occupancy, and lender.
The amount you entered fits within the accessible equity at a 80% combined limit.
Ranked by how well each structure matches the inputs above. This is an educational comparison of loan structures, not an approval, a rate quote, or a recommendation of a specific product for your circumstances.
A second mortgage for a lump sum, with a fixed rate and a fixed payment.
A revolving line secured by your home that you draw against as needed.
Replaces your existing first mortgage with a larger one and returns the difference as cash.
Founder of Vabasso Mortgage and a mortgage and banking executive with more than 24 years of industry experience.
Lien structure, combined loan-to-value, and the arithmetic of protecting a below-market first mortgage while accessing equity.
The same equity, reached three different ways. The columns differ most in what happens to the mortgage you already hold.
Availability, maximum combined loan-to-value, rates, and costs vary by lender, investor, occupancy, property type, and borrower profile. Nothing here is an offer of credit or a statement of eligibility.
Compare total monthly cost, not headline rates. A cash-out refinance quoted below a HELOC rate can still be the more expensive option, because the refinance applies its rate to the whole balance while the second lien applies a higher rate only to the amount drawn.
The crossover point moves with how much you need. Small draws against a large, cheaply-financed first mortgage almost always favor a second lien. Large draws against a small remaining balance narrow the gap and can reverse it.
Term matters as much as rate. Rolling short-horizon spending into a new thirty-year first mortgage lowers the payment and raises the lifetime interest, sometimes dramatically. A shorter fixed second lien can cost more per month and far less in total.
Finally, plan for the HELOC repayment period before you enter the draw period. Interest-only draws are comfortable; the amortizing payment that follows is the part borrowers are surprised by, and it arrives on a known date.
A revolving second lien you draw from as needed, with a draw period and a repayment period.
RequirementsA fixed lump sum at a fixed rate, with a fixed payment alongside your existing first mortgage.
RequirementsThe baseline agency terms your first mortgage is measured against.
RequirementsA thirty-page treatment of equity access, including Florida market considerations and a downloadable PDF.
Read the guideA HELOC is a revolving line you draw from as needed, usually at a variable rate, with a draw period followed by a repayment period. A home equity loan is a single lump sum at a fixed rate with a fixed payment from the first month. Both are typically second liens that sit behind your existing first mortgage and leave it untouched.
Yes. A cash-out refinance pays off the current first mortgage and replaces it with a larger new one, so the entire balance is repriced at today's rate. That is the decisive difference: if your existing rate is well below current pricing, refinancing to access equity means giving that rate up on the whole balance, not just the amount you take out.
Access is expressed as combined loan-to-value: all liens against the property divided by its value. The maximum is set by each lender and varies with occupancy, property type, credit profile, and lien position. There is no single industry ceiling, and the figure available on a primary residence is generally more generous than on a second home or rental.
Usually. Most HELOCs are tied to an index and adjust as that index moves, which means the payment can change during the draw period and again when the repayment period begins. Some lenders offer a fixed-rate conversion on all or part of the balance. Confirm the index, the margin, any lifetime cap, and how the repayment period is structured before you sign.
It depends less on the quoted rate than on what happens to your first mortgage. If your existing rate is meaningfully below current pricing, a second lien is often cheaper overall even at a higher rate on the smaller balance, because the first mortgage stays where it is. If your existing rate is at or above current pricing, a cash-out refinance can consolidate everything at one rate and one payment.
Deductibility depends on how the funds are used and on your overall tax position, and the rules changed materially in recent tax law. This is a question for your CPA, not for a lender. Do not assume deductibility when comparing the after-tax cost of these options.
A cash-out refinance carries full first-mortgage closing costs on the entire new balance. Second liens are usually cheaper to close, and some HELOC programs waive or credit certain costs, occasionally with an early-closure recapture provision. Compare the total cost against how long you expect to carry the balance.
Second liens are generally faster than a full first-mortgage refinance because the underwriting scope is narrower, though an appraisal requirement can change that. Any loan secured by a primary residence also carries a federal right of rescission that adds a defined waiting period after signing.
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These decisions overlap. If the page you landed on does not match your situation, one of these usually does.
Qualifies the property on its rent. Your personal income and tax returns never enter the calculation.
Read the hub Your deposits exceed your taxable incomeQualifies you on deposit activity over twelve or twenty-four months instead of tax-return net income.
Read the hub You own the business and are not sure which path fitsEvery documentation path for business owners, ranked against your own numbers.
Read the hub You are weighing a new rate against closing costsBreak-even arithmetic for rate-and-term and cash-out refinancing.
Read the hubThis home equity hub is written and maintained by Eric Burgess, Founder of Vabasso Mortgage, NMLS #240240. Read our editorial policy for how we research, review, and correct this material.
This page is educational. It is not an advertisement for a specific rate or term, not a commitment to lend, and not individualized financial, tax, or legal advice. Program availability, pricing, and qualification requirements vary by lender, investor, occupancy, property, and borrower profile, and change over time. Verify current requirements with a licensed mortgage professional before making a decision.