If your first mortgage rate is low, refinancing to access equity can be the expensive option. A second lien is often better.
Both pull equity out of your home. The difference is whether you disturb your existing first mortgage, and if that rate is below current market, disturbing it is costly.
When a HELOC wins
You have a low first-lien rate, you need funds in stages (a remodel, tuition, a bridge), and you want the flexibility to pay it back down. HELOC pricing has been improving, see the current market snapshot.
When a cash-out refinance wins
Your existing rate is at or above market, you want one fixed payment, or you need a larger lump sum than a second lien will support. Read rate-and-term versus cash-out for the structural comparison and see cash-out program details.
- Fixed payment and one servicer
- Typically higher closing costs than a HELOC
- Resets your first-lien rate, model this carefully
Run the break-even
Use the refinance break-even calculator on the calculators page, then ask me for both quotes side by side. Comparing one option against itself is how people overpay.
Where to go next
Programs mentioned
- Cash-Out Refinance
Put built-up equity to work.
- Refinance (Rate & Term)
Lower the rate, shorten the term, or both.
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