Should I get a HELOC or do a cash-out refinance?

It usually comes down to the spread between your current mortgage rate and today's refi rate. A cash-out refi resets your entire balance to the new rate — if you're locked in well below it, that reset can cost far more than the HELOC's higher rate on just the cash you take. Compare the blended rate of keeping your mortgage plus a HELOC against the refi rate, then check total cost including fees; this calculator does both.

What is a blended rate and why does it matter?

The blended rate is the weighted average rate across your existing mortgage balance and the new HELOC. For example, $280,000 at 3.25% plus $60,000 of HELOC money at 8.5% blends to about 4.18% — still far below a 6.5% cash-out refi, even though the HELOC rate alone looks scary. It's the fastest sanity check on whether converting your whole mortgage is worth it.

What are the risks of a HELOC compared to a refinance?

HELOC rates float with the prime rate, so payments can climb; interest-only minimums during the draw period mean the balance doesn't shrink unless you pay extra; and lenders can freeze or reduce a line if home values fall. A refi's rate is fixed — but it resets your term, which lowers the payment by stretching the debt out longer, and since 2018, HELOC interest is generally tax-deductible only when the money buys, builds, or substantially improves the home.

Free tool · Home equity

HELOC vs. Cash-Out Refi Calculator

A word first: borrowing against your home is a big-hammer move for big moments — a roof, a medical bill, crushing debt — not a regular avenue. If you're facing one of those moments, there are two ways to pull the cash: keep your current mortgage and add a HELOC on top, or convert everything into one new loan. This compares them honestly — blended rate, payments, the floating-rate risk, and the true all-in cost.

Loading the calculator…

This calculator needs JavaScript. The short version: a cash-out refi resets your entire mortgage balance to today's rate — if you're locked in below it, keeping the mortgage and adding a HELOC for just the cash is often dramatically cheaper.

The blended-rate math most people skip

A cash-out refinance doesn't just price the cash you're taking — it reprices every dollar you already owe. If you're sitting on a 3% mortgage and refinance at 6.5%, you pay the higher rate on the whole balance, not just the new money. That's the hidden cost of "converting," and it's usually the biggest number in the entire decision.

The HELOC route flips the trade: your existing balance stays at its old rate, and only the cash rides at the HELOC's higher, floating rate. The quick sanity check is the blended rate — the weighted average across both balances. $280,000 at 3.25% plus $60,000 at 8.5% blends to about 4.2%, far below a 6.5% refi even though the HELOC's sticker rate looks worse.

But the blended rate isn't the whole story, so the calculator also models what it leaves out:

Floating rates: HELOCs move with prime. Set an assumed drift, cap it at the lifetime max, and stress-test the verdict ±2%.
Interest-only draw periods: minimum payments feel cheap for ten years while the balance doesn't move — the model charges you for that.
The term reset: a new 30-year loan lowers the payment by stretching the debt. The debt-free timeline shows exactly how many extra years that buys the bank.
Your head start: enter the loan's first-payment date and any extra you've been paying, and it works out today's balance, credits the progress you've banked, and prices what a refi's fresh 30-year clock would undo.

The verdict is decomposed into three exact pieces — the cost of resetting your existing balance, the cost of funding the cash each way, and the fee difference — so you can see why one path wins, not just that it does.

Thinking bigger — replacing your entire mortgage with a first-lien HELOC and running your paycheck through it? That's the velocity-banking strategy, and it has its own honest simulator: the HELOC Conversion Calculator.

Common questions

When does the cash-out refi actually win?: Mostly when the rate spread reverses: if your current mortgage rate is at or above today's refi rates, converting consolidates everything at a fixed rate, often with a lower total cost — the calculator shows the exact break-even refi rate for your numbers. It can also make sense when you want one predictable payment and can't stomach a floating rate.
Is HELOC interest tax-deductible?: Since the 2018 tax changes, generally only when the money is used to buy, build, or substantially improve the home that secures the line — and only if you itemize. Cash used for debt consolidation, tuition, or a car usually isn't deductible. Talk to a tax professional about your situation.
Is anything saved or sent anywhere?: No. Every number runs in your browser. Nothing you type is uploaded, stored, or shared — and you can export both month-by-month schedules to CSV with one click.

Big decisions need a budget that keeps up

Whichever path you pick, the payment lands in your budget every month. Taly auto-splits each paycheck so the new payment, the renovation fund, and everything else get covered without you re-doing the math.

Get early access See how Taly works