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HELOC, home equity loans and cash-out refinances compared
Homeowners with a mortgage rate below today’s higher averages may benefit from HELOCs or home equity loans to preserve that lower rate, while those at or above average rates could see better terms via cash-out refinancing.
Homeowners looking to borrow against their property have three main options, each using home equity as collateral, but with different effects on their existing mortgage, Bankrate writes. A cash-out refinance replaces an existing mortgage with a new one at today’s rate, while home equity loans and HELOCs add a separate debt that generally leaves the current mortgage rate unchanged.
Bankrate says the key determinant is whether a borrower’s current mortgage rate is better or worse than what is available now. For people who bought or refinanced between 2020 and 2022 and locked in a primary rate below today’s environment, a HELOC or home equity loan may help preserve that lower rate, while a cash-out refinance may improve terms if the current rate is at or above today’s average.
The outlet also cites its research into how often borrowers fail to obtain the most competitive rates. In 2025, Bankrate said 87% of borrowers did not get the most competitive rate available, which it estimated cost the typical homeowner $3,343 per year, or $278 per month.
Bankrate concludes that choosing between a HELOC, a home equity loan, and a cash-out refinance is not one-size-fits-all and depends on individual financial needs, risk profile, and flexibility requirements, pointing to comments from Tim Choate, founder and CEO of Red Awning.