Side-by-Side Comparison
HELOC vs Cash-Out Refinance
Both let you tap your home equity, but they work very differently. A HELOC is a revolving line of credit; a cash-out refi replaces your mortgage with a larger one. Here is how they stack up.
Feature Comparison
| Feature | HELOC | Cash-Out Refinance |
|---|---|---|
| Min Credit Score | 680+ | 620+ |
| How Funds Are Received | Draw as needed (revolving) | Lump sum at closing |
| Rate Type | Variable (prime-based) | Fixed or adjustable |
| Impact on First Mortgage | None — stays in place | Replaces existing mortgage |
| Closing Costs | Low to none | 2–5% of loan amount |
| Max LTV | 90% CLTV | 80% LTV |
| Draw Period | 5–10 years (interest-only) | N/A — one-time payout |
| PMI/MIP Required | No | No (if equity ≥ 20%) |
| Repayment | Interest-only draws, then principal + interest | Fixed monthly P&I payment |
| Best Use Case | Ongoing projects, emergency fund, flexibility | Large one-time expense, lower rate |
Min Credit Score
HELOC
680+
Cash-Out Refinance
620+
How Funds Are Received
HELOC
Draw as needed (revolving)
Cash-Out Refinance
Lump sum at closing
Rate Type
HELOC
Variable (prime-based)
Cash-Out Refinance
Fixed or adjustable
Impact on First Mortgage
HELOC
None — stays in place
Cash-Out Refinance
Replaces existing mortgage
Closing Costs
HELOC
Low to none
Cash-Out Refinance
2–5% of loan amount
Max LTV
HELOC
90% CLTV
Cash-Out Refinance
80% LTV
Draw Period
HELOC
5–10 years (interest-only)
Cash-Out Refinance
N/A — one-time payout
PMI/MIP Required
HELOC
No
Cash-Out Refinance
No (if equity ≥ 20%)
Repayment
HELOC
Interest-only draws, then principal + interest
Cash-Out Refinance
Fixed monthly P&I payment
Best Use Case
HELOC
Ongoing projects, emergency fund, flexibility
Cash-Out Refinance
Large one-time expense, lower rate
Which Is Right for You?
Choose HELOC If...
Homeowners who want flexibility — ongoing renovations, a financial safety net, or staged spending.
Choose Cash-Out Refinance If...
Homeowners with a high existing rate who want one fixed payment and a large lump sum.
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