Is a HELOC or a cash-out refinance better?

When your existing mortgage rate is below today's refi rate, keeping the mortgage and adding a HELOC usually costs less in total, because a cash-out refi reprices your whole balance at the new rate. When rates have fallen below your old rate, the refi can win on both the payment and the total. The blended-rate output gives the quick read.

What is the blended rate?

The average rate across your total debt if you keep the mortgage and add the HELOC: old balance times old rate plus new money times HELOC rate, divided by the total. If a cash-out refi's rate is above the blend, you are paying more on every dollar to raise the same money.

Why does the cash-out refinance cost so much more here?

Because of the repricing and the term reset. At the defaults, moving a 250,000 dollar balance from 4.5 percent with 25 years left to 6.9 percent for 30 years adds roughly 176,000 dollars of interest before the new money costs anything. A lower monthly payment spread over more months is how the total grows while the payment shrinks.

Are HELOC rates really variable?

Almost always. A HELOC prices as an index, usually the prime rate, plus a margin, and the CFPB notes payments can change month to month. Many offers advertise a discounted intro rate for the first months. This calculator holds the rate constant as a simplification, so treat its HELOC figures as a snapshot, not a promise.

Should I roll the closing costs into the new loan?

Most cash-out borrowers do, and this calculator models that: the costs join the balance and accrue interest for the full term, so a 9,000 dollar cost becomes meaningfully more over 30 years. Paying costs in cash avoids that growth but raises the cash you need at closing. Either way, count the costs in the comparison.

HELOC vs Cash-Out Refinance Calculator

Compare borrowing against your home two ways: keep your mortgage and add a HELOC, or refinance everything at today's rate, with the repricing cost in the open.

Amount to borrow

Current mortgage balance

Current mortgage rate

Years left on the mortgage

years

HELOC rate

HELOC repayment years

years

Cash-out refi rate

New loan term

years

Refi closing costs

HELOC closing costs

X f in

Cheaper way to borrow

Keeping your mortgage and adding the HELOC costs less

Total cost: keep mortgage + HELOC: $214,044.82
Total cost: cash-out refinance: $432,630.53
Refi cost minus keep-and-HELOC cost: $218,585.71
Blended rate if you keep and add: 5.00%
Cost of repricing the old balance: $175,865.91
Monthly: mortgage + HELOC: $1,792.38
Monthly: cash-out refi: $2,035.07

Total debt balance by year

Side by side

Metric	Keep + HELOC	Cash-out refi
Monthly payment	$1,792.38	$2,035.07
Total interest	$213,544.82	$423,630.53
Closing costs	$500.00	$9,000.00
Total cost	$214,044.82	$432,630.53

Quick answer: Compare borrowing against your home two ways: keep your mortgage and add a HELOC, or refinance everything at today's rate, with the repricing cost in the open. Enter your numbers above and the result appears instantly, with the formula, assumptions, and sources shown below on this page.

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The decision usually turns on one fact the offers bury: a cash-out refinance reprices your ENTIRE mortgage balance at today's rate, not just the new money. If you are locked at 4.5 percent and need 50,000 dollars, keeping the mortgage and adding a 7.5 percent HELOC borrows the new money expensively but protects 250,000 dollars of cheap debt. This calculator totals interest and closing costs on both paths, shows your blended rate, and isolates what the repricing alone would cost.

What this result means

The blended rate is the fastest read: your old rate and the HELOC rate averaged across the total debt. When the refi rate is above that blend, keeping the mortgage usually wins, and the repricing-cost output shows exactly how much of the refi's total is just your old balance wearing the new rate for a new term. Two caveats keep the comparison honest. The refi's 30-year term restarts the clock, which lowers the payment while raising lifetime interest, so a cheaper monthly figure is not a cheaper loan. And the HELOC number here is steadier than reality: HELOC rates are variable (an index plus a margin), most start with an interest-only draw period whose minimum payment hides the true cost, and advertised intro rates expire. If the HELOC only works for you at its teaser rate, it does not work.

Assumptions

Both paths use the standard amortization formula through the shared engine. The keep option re-amortizes your remaining balance over the remaining term at your current rate, which reproduces your existing principal-and-interest payment exactly.
The HELOC is modeled as a FIXED-rate level amortization over the repayment years you set. Real HELOCs are variable (an index, usually prime, plus a margin), typically open with a roughly 10-year draw period allowing interest-only minimums, and may offer teaser intro rates. Interest-only minimums cost more over a lifetime than this model shows, and a rising prime rate raises every figure on the HELOC side; the CFPB's HELOC booklet covers both risks.
The cash-out refinance is one new loan: your old balance plus the new money plus the financed closing costs, at the new rate over the new term. This is the honest core of the comparison: the refi reprices the ENTIRE old balance, and the repricing-cost output isolates that piece alone.
Total costs count interest plus closing costs and exclude principal on both sides, since you owe the balance and the new money either way. The two paths run to their own payoffs, which differ: the refi restarts a full term while the keep option finishes on your current schedule, so the refi's lower payment buys more months of interest.
Closing-cost defaults are sourced: cash-out refis typically run 2 to 6 percent of the new loan (Bankrate, Rocket Mortgage); HELOCs often charge little or nothing up front but carry 50 to 250 dollar annual fees, which are not modeled. Rate defaults reflect mid-2026 averages (HELOC near 7.4 percent, 30-year refi near 6.9 percent, Bankrate) and move weekly.
Not modeled: HELOC rate changes, draw-period interest-only payments, annual and early-termination fees, mortgage interest tax deductibility, home-equity loan (fixed second lien) alternatives, and lender-specific pricing. This is an estimate for educational purposes only, not financial advice or a loan offer.

Key terms

Definitions for the terms this calculator uses, in our finance glossary .

How it works

Three amortizations and some honest bookkeeping. The keep option re-amortizes your remaining mortgage balance over its remaining term at your current rate (which reproduces your existing principal-and-interest payment exactly) and amortizes the borrowed amount at the HELOC rate over the HELOC repayment years. Its total cost is the remaining mortgage interest plus HELOC interest plus HELOC closing costs. The cash-out option builds one new loan, your balance plus the new money plus the financed closing costs, at the refi rate over the refi term; its total cost is all interest on that loan plus the closing costs themselves.

Two derived figures carry the insight. The blended rate is the keep option’s average price of money: (balance x current rate + new money x HELOC rate) / total debt. The repricing cost runs your OLD balance alone at the refi’s rate and term and subtracts its remaining interest today, isolating the part of the refinance that raises no new money at all.

Worked example

A $250,000 balance at 4.5 percent with 25 years left, borrowing $50,000, a 7.5 percent HELOC over 20 years, versus a 6.9 percent 30-year cash-out refi with 3 percent closing costs financed.

Keep + HELOC: payments $1,389.58 + $402.80 = $1,792.38 a month; total cost $214,044.82 (166,874 + 46,671 interest + $500 costs).
Cash-out refi: a $309,000 loan at 6.9 percent for 30 years pays $2,035.07 a month; total cost $432,630.53 (423,631 interest + 9,000 costs).
Blended rate: (250,000 x 4.5 + 50,000 x 7.5) / 300,000 = 5 percent, versus the 6.9 percent refi.
Repricing cost: $175,865.91, the extra interest from moving the old balance to 6.9 percent for 30 years. Most of the refi’s disadvantage is this one line.

What is included and excluded

The HELOC is deliberately modeled as a fixed-rate level amortization, which understates real HELOC risk in one direction and cost in another: real HELOCs are variable (an index, usually prime, plus a margin, per the CFPB), commonly open with a roughly 10-year interest-only draw period whose minimum payments cost more over a lifetime, and teaser intro rates expire. Not modeled: HELOC rate movement, annual fees ($50 to $250 is common), early-termination fees, home-equity loans (fixed second liens), tax deductibility, and pricing differences by credit. Rate and cost defaults are mid-2026 snapshots (HELOC near 7.4 percent and 30-year refi near 6.9 percent per Bankrate; refi closing costs 2 to 6 percent per Bankrate and Rocket) and move weekly. The paths run to their own payoffs, which differ, because the refi restarts a full term.

Sources

Frequently asked questions

Is a HELOC or a cash-out refinance better?: When your existing mortgage rate is below today's refi rate, keeping the mortgage and adding a HELOC usually costs less in total, because a cash-out refi reprices your whole balance at the new rate. When rates have fallen below your old rate, the refi can win on both the payment and the total. The blended-rate output gives the quick read.
What is the blended rate?: The average rate across your total debt if you keep the mortgage and add the HELOC: old balance times old rate plus new money times HELOC rate, divided by the total. If a cash-out refi's rate is above the blend, you are paying more on every dollar to raise the same money.
Why does the cash-out refinance cost so much more here?: Because of the repricing and the term reset. At the defaults, moving a 250,000 dollar balance from 4.5 percent with 25 years left to 6.9 percent for 30 years adds roughly 176,000 dollars of interest before the new money costs anything. A lower monthly payment spread over more months is how the total grows while the payment shrinks.
Are HELOC rates really variable?: Almost always. A HELOC prices as an index, usually the prime rate, plus a margin, and the CFPB notes payments can change month to month. Many offers advertise a discounted intro rate for the first months. This calculator holds the rate constant as a simplification, so treat its HELOC figures as a snapshot, not a promise.
Should I roll the closing costs into the new loan?: Most cash-out borrowers do, and this calculator models that: the costs join the balance and accrue interest for the full term, so a 9,000 dollar cost becomes meaningfully more over 30 years. Paying costs in cash avoids that growth but raises the cash you need at closing. Either way, count the costs in the comparison.

Related calculators

Learn how this works

New to this topic? Our companion guide explains it in plain language: HELOC or Cash-Out Refinance: Protect the Rate You Locked

By Sam Sage Last reviewed July 2026.