# Home Equity Loan vs Cash-Out Refinance Calculator: Find the Cheaper Path

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> Home equity loan vs cash-out refi? The cheaper path depends entirely on your current first-mortgage rate. Free calculator + clear verdict.

Amount you need to borrow ($)

Current first-mortgage balance ($)

Current first-mortgage rate (%)

Years remaining on first mortgage

Home equity loan rate quoted (%)

Home equity loan term (years)

Cash-out refi rate quoted (%)

Cash-out refi closing costs ($)

Home equity loan closing costs ($)

## The hidden cost of cash-out refinancing

If your current first-mortgage rate is below today's market rate (common for 2020-2021 borrowers at 3-4%), a cash-out refi forces you to give up that good rate. The "savings" on the cash-out portion are usually swamped by what you'd pay on the rest of the loan being re-priced at today's higher rate.

**Quick rule of thumb:** if your current first-mortgage rate is more than 1% below today's cash-out refi rate, take the home equity loan. The math almost always wins.

## The verdict logic

- **✅ Home equity loan:** your current first-mortgage rate is meaningfully below today's market AND you want fixed-rate certainty.

- **✅ Cash-out refi:** your current rate is above today's market. Refi captures both benefits at once.

- **⚠️ HELOC instead:** short payback timeline (under 5 years) and you're comfortable with rate risk.

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## Related calculators

- [HELOC vs cash-out refinance](https://themathsays.com/calculators/heloc-vs-cash-out-refinance-calculator/): if a variable-rate revolving line of credit fits the situation better than a fixed-rate lump sum.

- [Mortgage refinance break-even](https://themathsays.com/calculators/mortgage-refinance-break-even-calculator/): if you're considering a vanilla rate-and-term refi alongside the cash-out option.

- [Refinance to remove PMI](https://themathsays.com/calculators/refinance-to-remove-pmi-calculator/): if dropping PMI is part of the cash-out decision.

## FAQ

How is a home equity loan different from a HELOC?

Home equity loan: fixed rate, lump-sum disbursement, fully amortizing, like a second mortgage. HELOC: variable rate, revolving credit line you draw from as needed. Home equity loans are predictable. HELOCs are flexible but riskier on rate.

When does the home equity loan beat cash-out refi?

Almost always when your current first-mortgage rate is below today's market rate. Cash-out refi re-rates your entire first mortgage at today's higher rates. That hidden cost usually wipes out any savings on the cash portion.

What about closing costs?

Home equity loan closing costs typically $0-$1,500. Cash-out refi closing costs typically 2-5% of the new total loan amount, often $5,000-$15,000. That difference funds a lot of interest.

Is a home equity loan's interest tax-deductible?

Only if the proceeds are used to buy, build, or substantially improve the home that secures the loan. TCJA 2017 eliminated deductibility for personal-use cash-outs (credit card payoff, college, vacations). Verify with a CPA.

What's a typical home equity loan rate vs cash-out refi rate?

Home equity loans typically price 0.5-1.5% higher than a first-position cash-out refi rate, because they sit in second-lien position. But the rate gap matters less than whether you're disturbing a low-rate first mortgage.

Why would I ever pick cash-out refi then?

When your current first-mortgage rate is above today's market AND you want to consolidate to one payment. Or when you need a larger amount than a typical home equity loan will support.