Keep your mortgage and add a HELOC, or refinance everything? Price both paths.
A HELOC usually wins when your current mortgage rate sits well below today's refinance rates, because the high HELOC rate only applies to the new money. Worked example: a $300,000 balance at 4.25% plus a $50,000 HELOC at 8.5% blends to 4.86% and costs $2,024 a month, while a $350,000 cash-out refinance at 6.75% costs $2,270 a month. Over 5 years the HELOC path is about $41,000 cheaper and leaves you owing roughly $19,700 less. If your current rate is at or above today's rates, the refinance tends to win instead. Run your own numbers below.
| A: Keep Mortgage + HELOC | B: Cash-Out Refi | |
|---|---|---|
| Monthly payment | — | — |
| Interest rate on new money | — | — |
| Blended rate on all debt | — | — |
| Upfront costs | — | — |
| 5-year total financing cost | — | — |
| Balance remaining at horizon | — | — |
| HELOC | Cash-Out Refinance | |
|---|---|---|
| Rate type | Variable (tracks prime rate) | Fixed |
| Typical rate range* | Prime ± 0-2% (variable) | Same as purchase mortgage rates |
| Closing costs | $0-$500 (often waived) | 2%-6% of loan |
| Structure | 10-yr draw, then 10-20 yr repayment | 15, 20, or 30-yr fully amortizing |
| Payments during draw | Often interest-only | Principal + interest from month 1 |
| Max combined LTV | Typically 80%-90% | Typically 80% |
| Reuses money | Yes, it's a revolving line | No, one lump sum |
| Rate applies to | Only the new balance | Your entire mortgage balance |
*Rate ranges shift with the market; this calculator uses whatever rates you enter, so plug in a live quote before deciding. The structural facts in the table don't change.
Both paths get you the same pile of cash, so the fair question is which one costs less to carry. A cash-out refinance replaces your mortgage with one bigger loan at today's rate. A HELOC leaves your mortgage alone and adds a second, smaller loan at a higher but contained rate. This calculator prices both with real amortization, not rough averages.
Monthly payment uses the standard amortization formula: P × r ÷ (1 − (1 + r)^−n), where r is the monthly rate and n is the number of payments. For the HELOC path, we add your remaining mortgage payment to a fully amortizing payment on the new line over its repayment term. Total financing cost over your horizon equals every payment made, plus upfront costs, minus the principal you've knocked off. Ending balances come straight from the amortization schedules after the same number of months on each loan, so you can see who owes more when the horizon ends.
Enter your home value, balance, rate, and years left, plus the cash you want. Then fill in both offers: the HELOC's rate and repayment term on one side, the refinance's rate, term, and closing costs on the other. Use real quotes where you can, since the verdict flips entirely on the gap between your current rate and the refi rate. Watch the warning if your combined debt would exceed 90% of your home's value; that's where pricing gets ugly or approvals stop.
Take a $450,000 home with $300,000 left at 4.25% and 26 years to run, and a need for $50,000. The HELOC path keeps the $1,590 mortgage payment, adds a $434 payment on a 20-year $50,000 line at 8.5%, and blends to 4.86% across all $350,000 of debt. The cash-out refinance rolls everything into a $350,000 loan at 6.75% for 30 years, costing $7,000 in closing costs and paying $2,270 a month.
Over 5 years, the HELOC path costs $80,802 in financing (payments plus $500 in costs, minus principal paid down) against $121,771 for the refinance, a gap of $40,969. The HELOC path also ends the 5 years owing $308,853 versus $328,565. That's the whole trade in one sentence: don't refinance a cheap loan to buy a small amount of money. Flip the numbers, say the current rate is 7% and the refi offers 6.5%, and the refinance starts winning on its own.
It comes down to your current rate. If your mortgage rate is well below today's refinance rates, keeping it and adding a HELOC is usually cheaper, even though HELOC rates run higher, because the HELOC only applies to the small new balance. In a worked example, $300,000 at 4.25% plus a $50,000 HELOC at 8.5% costs $40,969 less over 5 years than rolling everything into a $350,000 refinance at 6.75%. If your current rate is at or above today's rates, the cash-out refinance often wins outright.
A blended rate is the weighted average interest rate across all your loans. Take each balance times its rate, add those up, and divide by total debt. A $300,000 mortgage at 4.25% plus a $50,000 HELOC at 8.5% blends to about 4.86% on $350,000, which beats a 6.75% cash-out refinance by nearly 2 full percentage points.
Most lenders cap total debt at 80% to 90% of your home's value, including the new loan. On a $450,000 home with a $300,000 balance, an 80% cap leaves $60,000 of borrowing room and a 90% cap leaves $105,000. HELOCs at 85% combined loan-to-value are common; some lenders go to 90% or even 100% at noticeably higher rates.
HELOCs are often cheap to open: many credit unions and banks charge $0 to $500 at closing, though some add early-closure fees if you pay the line off in the first two or three years. A cash-out refinance carries full mortgage closing costs, commonly 2% to 6% of the new loan, so a $350,000 refinance can cost $7,000 to $21,000 out of pocket or rolled into the balance.
HELOC rates are variable and typically move with the prime rate, so your payment can rise after you open the line. Your home also secures the debt, and some lenders can freeze or reduce a line if your home's value drops. A cash-out refinance trades that risk for a higher fixed rate on your entire balance.