Quick answer
Quick answer: Cash-out refi replaces the first mortgage—new rate on the whole balance, full closing costs, one payment. A HEL adds a fixed lump-sum second with a predictable amortizing payment. A HELOC adds a revolving second—cheap during interest-only draws, then payment can jump when repayment starts or the index moves. Pick based on whether you like your current first-lien rate, how long you need the cash, and whether you can model HELOC resets like an ARM.
Lien position matters
A cash-out refinance replaces your first lien—often larger balance, single payment, new rate/terms. A home equity loan (HEL) is typically a fixed-rate second with a lump sum. A HELOC is a revolving second with draw period then repayment—rate usually variable, payment more volatile.
Product matrix
| Option | Rate type | Cash flow shape |
|---|---|---|
| Cash-out refi | New first-note terms (often fixed) | Single amortizing payment on higher balance |
| HEL (second) | Often fixed on lump sum | Second payment until paid or refinanced away |
| HELOC | Typically variable + margin | IO draw phase then amortizing—payment can jump |
Borrowing $80,000: payment shape (illustrative)
| Structure | Assumed terms | Early-stage payment |
|---|---|---|
| Fixed HEL (second) | $80k @ 8.5%, 20-year amortization | ~$694/mo P&I until paid |
| HELOC (interest-only draw) | $80k drawn @ 9.0% IO during draw | ~$600/mo interest-only—rises when principal amortizes or index resets |
The HELOC row looks “cheaper” month one but carries payment path risk; the HEL row commits to a higher floor today for predictability.
How to compare all-in cost
Compare APR or total cost over your planned hold period, not headline rate alone. Cash-out refi triggers full first-mortgage closing costs; seconds may be cheaper upfront but carry higher blended risk if the first is low-rate and the second is high. Model scenarios in the mortgage calculator and loan calculator with honest payoff horizons.
Foreclosure ordering & use-of proceeds
Using equity for consumption (autos, travel) stacks secured debt on your roof. Using it for high-ROI repairs or rate arbitrage can be rational—but write the plan in dollars. If you are consolidating unsecured cards, compare to unsecured payoff timelines and APR, not just payment.
For first-lien mechanics vs unsecured installment debt, read loan vs mortgage collateral basics.