Compare
A cash-out refinance replaces your first mortgage with a larger one and gives you the difference as cash. A home equity loan leaves your first mortgage in place and adds a second loan with a fixed payment schedule. The deciding question is usually whether the terms on your current first mortgage are worth keeping.
| Topic | Cash-out refinance | Home equity loan |
|---|---|---|
| The big advantage | One loan and one payment, often at a fixed rate, plus a chance to restructure your whole mortgage at the same time. Put the monthly savings toward principal and you build your equity back faster. | Keeps your existing first mortgage in place. |
| Credit scores | Options for credit scores over 500, depending on the program. | Typically needs a higher credit score. |
| How you get the money | One lump sum at closing, from a new first mortgage that is larger than the old one. | One lump sum at closing, from a second loan on top of your existing mortgage. |
| What happens to your first mortgage | It is paid off and replaced with the new loan. | It stays exactly as it is. |
| Rate type | Often fixed, with adjustable options on some programs. | Usually fixed. |
| What your monthly picture looks like | One mortgage to pay. | Two loans to pay: your existing mortgage plus the new one. |
| Closing costs | Similar in kind to a first mortgage: lender fees, title, appraisal, and more. | Often lighter than a refinance, depending on the lender and the state. |
| How the money is typically used | Larger needs, or when you also want to restructure the mortgage itself. | A known, one-time cost when you want to leave the first mortgage alone. |
| Documentation usually needed | A full mortgage application, income, assets, and an appraisal. | Income, credit, and a property valuation, often lighter than a refinance. Specifics vary by lender. |
| Best fit | Your first mortgage terms are not worth protecting, or you want a single, simpler structure. | Your first mortgage terms are worth protecting and you want a fixed schedule on the new money. |
Program availability, guidelines, and pricing vary by lender and by the state where the property is located, and change without notice. This comparison is educational, not a credit decision or an offer, and it is not tax or legal advice. Program restrictions apply.
This is one of the most common comparisons I run, and it almost always turns on your current first mortgage. If its terms are good, I'm usually reluctant to replace it. If they are not, a refinance can fix more than one problem at once.
I work with many lenders, so I can price both paths against your real numbers instead of guessing. I look at the monthly cash-flow effect, what each costs to set up, and how long you are likely to stay in the home.
If the answer is to do neither, or to wait, I'll tell you that too.
Yes, when you already have a first mortgage. It is a separate loan secured by your home that sits behind your first mortgage, which is why your first mortgage keeps its terms.
It typically does, because the new loan is larger and has new terms. How much it changes, and in which direction, depends on the new structure. I run the comparison so you can see it before you decide.
A cash-out refinance typically has setup costs similar to a first mortgage, while a home equity loan is often lighter, depending on the lender and the state. Setup cost is only part of the picture, so I compare the cost over the time you will keep the loan.
Yes, either can be used that way, and either can replace several high-interest payments with one. Putting part of the monthly difference toward principal can shorten the payoff. I run both so you can compare the monthly relief and how fast the balance comes down.
Both generally require meaningful equity to remain after the new borrowing, and each program sets its own limits. A short conversation is usually enough to see where you stand.
