A home equity loan adds a second mortgage while keeping your first mortgage intact. A cash-out refinance replaces your entire mortgage with a new, larger loan. Choose based on your current rate, how much cash you need, and closing costs. Dream Financial Management since 1994.
2
Lien Positions
$500
Min Closing Costs
30+
Years Experience
See which option fits your needs — free consultation.
Both a home equity loan and a cash-out refinance let you turn your home's equity into usable cash, but they take fundamentally different paths. A home equity loan is a second mortgage that leaves your existing first mortgage untouched — you get a lump sum at a fixed rate with its own payment. A cash-out refinance replaces your entire first mortgage with a new, larger loan that includes your equity cash-out, at a new rate and term. The right choice depends on your current mortgage rate, how much you need to borrow, and whether you can absorb the higher closing costs of a full refinance.
| Feature | Home Equity Loan | Cash-Out Refinance |
|---|---|---|
| Lien Position | Second mortgage | First mortgage (replaces existing) |
| Existing Mortgage | Kept intact | Paid off & replaced |
| Rate | Fixed 7-8.5% | Fixed 6-7% |
| Closing Costs | $500-2,000 | 2-5% of loan |
| Term | 5-30 years | 15-30 years |
| Best When | Current rate is good, need smaller sum | Current rate is high, need large sum |
These three factors most often tip the decision:
Your Current Rate
Rate lower than today? Keep it. Higher? Refinance.
How Much You Need
Under $100K → equity loan. Over $100K → refinance.
Closing Costs
$500-2K for equity loan vs 2-5% of loan for refinance.
Dream Financial Management evaluates your current mortgage, your cash needs, and your goals to recommend the right path. 500+ lenders. Since 1994.
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