HELOC vs. cash-out refinance

Both let you pull equity. They are not the same loan.

Cash-out refinance

You replace the existing first mortgage with a larger one and take the difference in cash. The new rate applies to the entire balance, not only to the cash you pulled. Closing costs look like a purchase mortgage. If your current rate is 3.5% and today’s 30-year average is near 7%, a cash-out refi means giving up the cheap first mortgage to get a check. Run that math before the kitchen remodel starts to feel free.

The break-even calculator is for a rate-and-term refi. For cash-out, add the fact that you are also paying the new rate on money that used to sit as equity.

HELOC

A home equity line of credit is usually a second lien. The first mortgage stays. You draw as needed, often during a variable-rate draw period, then repay. Because the index is typically prime or SOFR, a Fed hike can reprice the HELOC on the next cycle while the first mortgage does not move.

That is the trade: you keep a cheap first mortgage, and you accept a line that will follow the funds rate up and down. Closing costs are usually lower than a full refinance. The rate risk is higher.

When the last hike matters

After the September 16, 2026 quarter-point increase, a variable HELOC is the product that can change without a new closing. A cash-out refi only changes if you choose to do it at today’s fixed rates. Neither choice is “the” answer. The question is whether you are willing to put the first mortgage in play.

Not a recommendation to tap equity. Home-secured debt can go to foreclosure. Compare written Loan Estimates, not this paragraph.