HELOC vs. Cash-Out Refinance Calculator
Compare the lifetime cost of a HELOC against a cash-out refinance on the same home. Models the rate reset on your full first mortgage, closing costs on each option, and total interest over your expected hold period using 2026 rates.
Home & Current Mortgage
HELOC Terms
Cash-Out Refinance Terms
August 2026 averages: cash-out refi ~6.5-6.75%, HELOC variable ~8.0-9.5% (tied to prime).
Cost Comparison
Enter your home and loan details and click compare.
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Introduction
Tapping home equity in 2026 comes down to one number: your current first-mortgage rate. If you locked a 3% or 4% rate between 2021 and 2024, a cash-out refinance reprices your entire balance at today 6.5% to 6.75% market, and that rate reset on the full loan usually costs more than the higher rate on a smaller HELOC. The Federal Reserve H.15 release tracks the prime rate that drives HELOC pricing, and Bankrate weekly data shows cash-out refinance APRs averaging 6.69% to 6.75% through mid-2026. This calculator models both options on the same home, including the closing-cost difference (cash-out closing costs apply to the entire new loan, HELOC closing costs apply only to the line amount), so you can see the true lifetime cost rather than just the monthly payment.
What This Calculator Does
This tool compares the total cost of a HELOC against a cash-out refinance on the same property over your expected hold period. It keeps your existing first mortgage intact for the HELOC option (so your low rate survives) and models interest-only draw payments plus principal-and-interest repayment. For the cash-out option it replaces your mortgage with a new, larger loan at the new rate and charges closing costs on the full balance. It reports total interest paid over the hold period, closing costs, and a recommendation based on which option costs less.
The Formula
The HELOC option preserves your existing first mortgage, so you keep paying its amortized payment and only add interest on the new line. During the draw period (typically 10 years) you pay interest only on the HELOC, then you amortize the balance over the repayment period. The cash-out option pays off your old mortgage and replaces it with a new loan equal to the old balance plus the cash you take out, all at the new rate. Because closing costs on a refinance run 2% to 5% of the entire new loan, they are much larger than HELOC closing costs on a smaller line, which is why cash-out rarely wins when your current rate is already low.
Step-by-Step Example
Enter your home and mortgage
A homeowner with a $600,000 home, a $320,000 mortgage at 3.5% with 27 years left, who wants $80,000 cash.
Set the HELOC terms
She enters an 8.5% HELOC rate, a 10-year draw, and a 20-year repayment, with a 10-year hold period.
Set the cash-out terms
She enters a 6.75% cash-out rate on a new 30-year loan for $400,000 ($320,000 plus $80,000 cash).
Read the recommendation
Because her 3.5% first mortgage stays intact, the HELOC usually wins despite the higher rate, since the cash-out would reprice all $320,000 at 6.75%.
Real-World Use Cases
Home Renovation Funding
A homeowner planning a $75,000 kitchen remodel compares keeping their 3.25% first mortgage with a HELOC against resetting the whole loan at 6.75% with a cash-out refi.
Debt Consolidation
A borrower with high-rate credit card debt tests whether the lower cash-out rate on a single payment beats the HELOC, factoring in that the cash-out extends the first-mortgage term.
Investment Property Equity Access
An investor deciding how to pull equity for a down payment on the next property compares the two options over a 5-year hold before the property is sold or refinanced again.
Common Mistakes to Avoid
Comparing only the monthly payment. A cash-out refinance often shows a lower monthly payment than a first mortgage plus HELOC, but only because it stretches the principal over 30 years. Total interest paid is the number that matters, and it is usually higher for the cash-out when your current rate is low.
Ignoring closing costs on the full loan. Cash-out closing costs run 2% to 5% of the entire new loan balance, not just the cash you take. On a $400,000 new loan that is $8,000 to $20,000, versus $1,600 to $4,000 on an $80,000 HELOC.
Assuming HELOC rates stay flat. HELOC rates are variable and tied to prime. If the Fed raises rates, your draw-period payment rises. Stress-test the HELOC rate 1 to 2 points higher to see if the option still wins.
Forgetting that a refinance resets the clock. If you have 22 years left on your mortgage and refinance into a new 30-year loan, you add 8 years of payments. That extension, not just the rate, drives the total interest difference.
Frequently Asked Questions
Is a HELOC or cash-out refinance better in 2026?
If your current mortgage rate is under 5%, a HELOC is usually better because it keeps your low first-mortgage rate intact and you only pay the higher rate on the smaller equity line. If your current rate is at or above today market (around 6.5% to 6.75% for cash-out in mid-2026), a cash-out refinance can win because the rate reset cost is small and you get a single fixed-rate payment.
What are current cash-out refinance rates in August 2026?
Bankrate data shows cash-out refinance APRs averaging 6.69% to 6.75% through July 2026, roughly 0.25 to 0.50 percentage points above rate-and-term refinance rates because cash-out is considered riskier. HELOC variable rates are higher on paper (around 8.0% to 9.5%, tied to prime) but apply only to the smaller line amount.
How much equity can I take out?
Most lenders cap the combined loan-to-value (CLTV) at 80% for a HELOC and 80% for a cash-out refinance, with some going to 85% or 90% for strong borrowers. On a $600,000 home with a $320,000 mortgage, an 80% CLTV lets you borrow up to $160,000 ($480,000 total minus $320,000 existing).
Are HELOC interest payments tax-deductible?
Interest on a HELOC or home equity loan is deductible only if the proceeds are used to buy, build, or substantially improve the home that secures the loan, under the Tax Cuts and Jobs Act limitation that runs through 2028. Proceeds used for debt consolidation, education, or other purposes are not deductible. Cash-out refinance interest on the portion used to improve the home is deductible under the same rule.
Accuracy and Disclaimer
This calculator uses August 2026 rate benchmarks and standard closing-cost assumptions (2% for HELOC, 3% for cash-out refinance). Actual rates, closing costs, and CLTV limits vary by lender, credit score, and property type. HELOC rates are variable and can change. This is not financial advice or a loan offer. Consult a licensed mortgage professional for a quote on your specific situation.
Conclusion
The decision almost always comes down to whether your current rate is below or near today market. Run your real numbers here, then check the break-even against how long you plan to stay. For the standalone HELOC payment detail, pair this with our HELOC Calculator, and for the refinance side use the Mortgage Refinance Break-Even Calculator to confirm the timing.
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