Home Equity Loan vs Cash-Out Refi Calculator
Compare a Home Equity Loan (second mortgage) against a cash-out refinance head to head. See combined monthly payments, total interest on the borrowed cash, closing cost comparison, and the full 10-year cost. Crucial if you have a low-rate mortgage from 2020-2022.
The rate environment at the time you got your mortgage is the most important factor in this decision.
How to Use This HEL vs Cash-Out Refi Calculator
Enter your current mortgage balance, your existing interest rate, home value, the cash amount you need, and the rates available for both a Home Equity Loan and a cash-out refinance. The calculator shows combined monthly payments for each option, total interest on the borrowed cash, and the 10-year cost including closing costs.
Quick Tab
The most important input is your current mortgage rate. If your rate is below 5%, a cash-out refi almost certainly hurts you by replacing a low rate with a much higher one. The quick view shows combined monthly payments side by side so you can immediately see which option costs less each month.
Advanced: Closing Costs & Interest Comparison
A Home Equity Loan typically costs $2,000-$5,000 to close, while a cash-out refinance costs $3,000-$8,000 because it involves refinancing your entire mortgage balance. The "Which Option Wins" tab explains the scenarios where each product excels.
Pro: Rate Environment, Tax & 10-Year Total
The rate environment analysis shows how the era you got your mortgage determines which product you should use. The tax deductibility section explains TCJA 2018 rules. The 10-year table shows cumulative total cost year by year for the most complete comparison.
HEL vs Cash-Out Refi Formula
HEL Payment = PMT(HEL Rate / 12, HEL Term × 12, Cash Needed)
Cash-Out Refi Monthly = PMT(New Rate / 12, 360, Balance + Cash)
Monthly Difference = Cash-Out Monthly − HEL Combined Monthly
Example (low-rate mortgage):
Existing: $280,000 at 3.5% / 25yr = $1,401/mo
HEL: $50,000 at 8.5% / 10yr = $620/mo
HEL Combined = $1,401 + $620 = $2,021/mo
Cash-Out Refi: $330,000 at 6.75% / 30yr = $2,141/mo
Monthly Difference = $2,141 − $2,021 = $120/mo more for refi
Plus: refi replaces 3.5% rate — saves $120/mo but costs the low rate
The math shows why preserving a low-rate mortgage is so powerful. Even though the HEL rate is much higher (8.5% vs 6.75%), keeping a 3.5% rate on $280,000 more than offsets the higher HEL rate on just $50,000.
Example: The Chen Family Decision
$450,000 home, $280,000 balance at 3.5%, need $50,000 for kitchen remodel
| Current Mortgage | $280,000 at 3.5% — $1,401/mo |
| Option A: HEL | $50,000 at 8.5% / 10yr — $620/mo |
| HEL Combined Monthly | $1,401 + $620 = $2,021/mo |
| Option B: Cash-Out Refi | $330,000 at 6.75% / 30yr = $2,141/mo |
| Monthly Difference | Refi costs $120 more per month |
| HEL Closing Costs | $3,500 |
| Refi Closing Costs | $6,600 |
| Decision | HEL wins — saves $120/mo and $3,100 in closing costs |
The Chen family keeps their 3.5% rate on $280,000, takes a HEL only on the $50,000 they need, and saves $1,440 per year. Over 10 years they save $17,700 by not refinancing.