If you've built up equity in your home, you have options for putting it to work. The two most common are a cash-out refinance and a home equity line of credit (HELOC). They both let you borrow against what your home is worth, but the way you receive the money — and pay it back — is where they split.
How a cash-out refinance works
A cash-out refinance replaces your existing mortgage with a new, larger one. You receive the difference between the two as a lump sum. If your home is worth $450,000 and you owe $285,000, you might refinance into a $360,000 loan and walk away with roughly $75,000 in cash, minus closing costs.
This makes the most sense when current rates are at or below your existing rate, since you're resetting your whole mortgage. You get one predictable monthly payment at a fixed rate.
How a HELOC works
A HELOC leaves your original mortgage untouched. Instead, it adds a second, revolving line of credit you can draw from as needed — similar to a credit card secured by your home. You only pay interest on what you actually use.
This is the better fit when you want flexibility, don't need all the money at once, or don't want to disturb a low rate you already have on your first mortgage.
How much equity do you have?
Estimate your available equity in seconds before you decide which option fits.
Try the equity calculatorThe quick way to decide
- Choose cash-out refinance if you want a large lump sum and current rates are favorable.
- Choose a HELOC if you want flexible access over time and already have a low first mortgage rate.
- Consider a home equity loan if you want a fixed lump sum without touching your first mortgage.
Your specific numbers — rate, equity, and what you're funding — ultimately decide which one wins. Whichever route you choose, compare at least two or three lenders before committing, since rates and closing costs vary widely.