When you'll pay back the borrowed amount in under 5-7 years AND your current first mortgage rate is good (under 5%). The closing costs are far lower and you don't disturb your existing low-rate first mortgage.

HELOC vs Cash-Out Refinance Calculator — Which Costs Less Over Your Real Timeline

Amount you need to borrow ($) Current first-mortgage balance ($) Current first-mortgage rate (%) If this is below today's market rate, that's the most important number on the page. Years remaining on first mortgage HELOC rate quoted (%) Variable rate, typically Prime + margin. Today's typical: 8.5-9.5%. Cash-out refi rate quoted (%) Cash-out refi closing costs ($) HELOC origination + setup ($) Many HELOCs are no-cost or under $500. Cash-out refi closing is typically 2-5% of new loan. How many years until you pay it back? Realistic timeline. Tappable equity used for vacation = 5+ years. Home improvement = 7-15 years. Debt consolidation = depends on discipline.

How this works

HELOC total cost = (HELOC rate × amount × years to payoff) + setup fees.

Cash-out refi total cost = (new payment over the same payback period) + closing costs + (difference between old and new first-mortgage rate × first-mortgage balance × remaining years).

The big swing factor: if your existing first-mortgage rate is meaningfully lower than today's refinance rate, the cash-out refi creates a hidden cost by re-pricing your entire existing mortgage at a higher rate. The calculator accounts for this.

The forgotten variable: HELOC rates are variable. The starting rate in the comparison is what you have today; in 3 years, the rate could be 2-3 percentage points higher. The verdict accounts for this risk based on your payback timeline.

The honest verdict logic

✅ HELOC: short payback timeline (under 7 years) AND your current first-mortgage rate is below today's market. Don't disturb a good first mortgage.
✅ Cash-out refi: long payback timeline (10+ years), OR your current first-mortgage rate is above today's market (so the refi also lowers your existing payment).
⚠️ Depends: medium timeline (7-10 years) and the rates / costs are roughly balanced. Consider a fixed home equity loan as a third option.

Compare HELOC and refi rates

HELOC from Figure Cash-out refi rates

FAQ

When does HELOC win?

When you'll pay back the borrowed amount in under 5-7 years AND your current first mortgage rate is good (under 5%). Closing costs are far lower and you don't disturb your existing low-rate first mortgage.

When does cash-out refi win?

When you'll carry the debt long-term (10+ years) AND your current first mortgage rate is above today's market rate, so refinancing also drops your existing payment. You lock in a fixed rate against future rate-rise risk.

What about the tax deductibility?

Since 2018, both HELOC and cash-out interest are only deductible if the proceeds are used for home improvements that materially add value (Tax Cuts and Jobs Act). Using the cash for credit card payoff, college, vacations? Interest is NOT deductible. This narrows the after-tax advantage of either option.

Is the HELOC variable rate dangerous?

Variable HELOC rates can rise significantly — they're typically tied to Prime + margin. If rates rise 2-3% over a few years, what looked like a cheap HELOC can become more expensive than the cash-out refi rate you skipped. Calculator factors in rate-rise scenarios.

What about a home equity LOAN (not line of credit)?

Different product — fixed rate, lump sum, structured like a second mortgage. Often better than HELOC for a one-time expense at a fixed rate. See our home equity loan vs cash-out calculator.

Is borrowing against my house ever the right move?

For home improvement that adds real value: usually yes. For credit-card consolidation: only if you'll keep the cards paid off going forward — otherwise you've just turned unsecured debt into a lien on your house. For vacations or speculation: no.