A cash-out refinance replaces your existing mortgage with a new, larger one and gives you the difference in cash. A home equity line of credit (HELOC) leaves your first mortgage in place and adds a separate line of credit you borrow from as needed. The better choice depends on your current mortgage rate, how much you need, and how you plan to use the money.

How a cash-out refinance works

  • You take out a new mortgage for more than you owe and receive the difference at closing.
  • The new loan has one rate and one monthly payment, and typically replaces your current mortgage entirely.
  • Closing costs apply, similar to a regular refinance.
  • Lenders limit how much of your home's value you can borrow against. The limit depends on the program and your credit.

How a HELOC works

  • You keep your current mortgage and open a second line of credit secured by your home.
  • You borrow as you need during a draw period, then repay during a repayment period.
  • Rates on HELOCs are commonly variable, so your payment can change.
  • Closing costs are often lower than a full refinance, though they vary by lender.

When each one tends to make sense

  • Cash-out refinance: when today's rates are lower than or close to your current rate, or you want one fixed payment and a single loan.
  • HELOC: when your current mortgage rate is low and you want to keep it, or when you need flexible access to funds over time, such as for renovations.

If your current rate is much lower than today's rates, refinancing the whole balance can cost more over time even if the cash is useful. Compare real numbers before you decide.

Questions to ask before borrowing against your home

  1. What will my total monthly payment be, including the existing mortgage?
  2. What are the closing costs and the rate type (fixed or variable)?
  3. How long until I break even on closing costs?
  4. What happens if home values or my income change?

Frequently asked questions

Is a cash-out refinance the same as a regular refinance?

No. A regular refinance changes your rate or term without taking out extra cash. A cash-out refinance increases your loan balance.

Where can I learn more?

See our pages on refinancing and HELOCs, and the video on when it makes sense to buy mortgage points.

Call JahnLends at (732) 754-7474 or start online to compare your options →

Rates, terms and loan limits vary by lender and program and change without notice. A home equity loan or line is secured by your home. JahnLends is the Woodbridge, NJ branch of AMS Mortgage Services, NMLS# 145742. Equal Housing Opportunity. For information purposes only. This is not a commitment to lend or extend credit. All loans are subject to credit approval. Other restrictions may apply.