Cash-Out Refinance vs Home Equity Loan vs HELOC: Which Is Best for You?

Homeowners are sitting on more equity than almost any point in the last decade. As of early 2026, mortgaged homeowners hold an average of about $195,000 in equity they could tap while still keeping 20% ownership in their home. 

Nationally, that adds up to roughly $11 trillion in untapped equity. If you're one of them, you could be putting your money to work for home improvements, a rainy-day or investment fund, or paying down higher-interest debt like credit cards or student loans.

Cash-out refinance, home equity loans, and Home Equity Lines of Credit (HELOCs) are the three main ways to borrow against your home's value, and each works differently depending on your current rate, your timeline, and how you plan to use the money. Let's break down what's involved with each, and how today's rates compare.
 

At a Glance: Cash-Out Refinance vs. Home Equity Loan vs. HELOC

Each of these options lets you borrow against your home's equity, but they work in fundamentally different ways — from how the rate is set to whether you get one lump sum or an ongoing line of credit. Here's how they stack up before we dive into the details.
 

A Deeper Dive into Your Options

Now that you've seen how these three options compare side by side, let's take a deeper dive into each option to see which one fits your situation the best.

Cash-Out Refinance

A cash-out refinance replaces your existing mortgage with a new, larger loan, giving you the difference in cash. It leaves you with just one monthly payment instead of two, but it also means your entire loan takes on a new rate and term. This is a bigger consideration now that many homeowners are sitting on rates well below today's ~6.5–6.6% average.

• Your new loan balance is higher than your current one, and the difference is paid to you in a single lump sum.
• The amount you can borrow depends on your home's value, your remaining mortgage balance, and the loan type you choose.
• Most lenders require you to keep at least 20% equity in your home after the cash-out.
• Closing costs typically run 3–6% of the loan amount, and mortgage insurance may apply if you borrow more than 80% of your home's value.
• Cash-out refinances are available on primary residences, second homes, and in many cases investment properties.
• You can choose a fixed or adjustable rate, and the funds can be used for anything — debt consolidation, home renovations, medical bills, tuition, or other major expenses.

See how a cash-out refinance works or learn how to use it to pay off debt.
 

Home Equity Loan

A home equity loan, often called a second mortgage, is a separate, fixed-rate loan on top of your existing mortgage rather than a replacement for it. That distinction matters most if you want to keep a first-mortgage rate that's lower than what's available today.

• Unlike a cash-out refinance, a home equity loan adds a second monthly payment rather than replacing your first one.
• You receive a specific lump sum upfront, so you'll want to know exactly how much you need before applying.
• The amount you can borrow is based on your home's value and how much you still owe on your current mortgage — most lenders require 15–20% equity remaining.
• Rates currently average around 7.4–8.1%, though borrowers with strong credit can find rates closer to 6.5%. That's typically higher than a primary mortgage but lower than credit cards or personal loans.
• Closing costs run roughly 1–5% of the loan amount, often less than a full refinance.
• Home equity loans are available on investment properties in some cases, though they carry more risk and can be harder to qualify for.

Explore home equity loan options to see current rates and eligibility.
 

HELOC

A HELOC works more like a credit card than a loan: instead of a lump sum, you get a revolving line of credit secured by your home, which you can draw from as needed.

• Like a home equity loan, a HELOC is a separate debt on top of your mortgage, adding another monthly payment.
• The key difference from a home equity loan is flexibility — a HELOC lets you borrow, repay, and borrow again up to your limit during the draw period, rather than receiving one payout.
• Most HELOCs have two phases: a draw period (often 5–10 years, sometimes interest-only) followed by a repayment period, when principal and interest payments begin.
• Rates are variable and currently average around 7.2–7.4%, meaning your payment can shift as market rates move.
• You'll typically need 15–20% equity remaining, and HELOCs may come with closing costs or annual fees depending on the lender.
• HELOCs are available on investment properties in some cases, though qualification tends to be more difficult than for a primary residence.

For more information on home equity, check out our post Home Equity 101.
 

Which Option Fits Your Situation?

There's no single "best" choice  — the right one depends on your current mortgage rate, how much you need to borrow, and whether your expense is a one-time cost or something ongoing. Here's a quick way to think through it.

• If your current mortgage rate is below today's ~6.5–6.6% average: A home equity loan or HELOC likely makes more sense than a cash-out refinance. Refinancing your entire mortgage would mean trading your lower rate for today's rate on your whole loan balance, not just the cash you're taking out. A second mortgage lets you access equity while leaving your original loan untouched.
• If your current mortgage rate is at or above today's average: A cash-out refinance is worth a closer look. You may be able to lower your rate on your existing balance while also pulling out cash, effectively solving two problems in one transaction.
• If you need a one-time lump sum for a specific expense: Both a cash-out refinance and a home equity loan work well here, since both pay out in a single deposit with a fixed monthly payment. Which one wins usually comes down to the rate comparison above.
• If your expense is ongoing, uncertain, or spread out over time: A HELOC tends to be the better fit. Think home renovations happening in phases, or wanting a financial cushion available if needed rather than borrowing it all upfront. You only pay interest on what you actually draw.
• If you're not sure how much you'll need or when: A HELOC's revolving structure gives you room to borrow only as expenses come up, without committing to a lump sum you may not fully use.

If none of the scenarios above fit your situation, talk to an Onity Mortgage loan officer to figure out which option aligns with your goals.
 

Where Mortgage Rates Stand in 2026

As of mid-July 2026, the average 30-year fixed mortgage rate sits around 6.5%, with home equity loans averaging roughly 7.4–8.1% and HELOCs around 7.2–7.4%. Earlier this year, forecasters expected meaningful relief by Q4. Fannie Mae's March outlook projected rates dropping as low as 5.7% by year-end. 

That forecast has since been revised upward: as of Fannie Mae's June 2026 outlook, 30-year rates are now expected to hover around 6.4% for the remainder of the year, with persistent inflation and geopolitical uncertainty cited as the main reasons relief hasn't materialized as quickly as hoped. The Mortgage Bankers Association has echoed that view, suggesting most of the rate relief homeowners were expecting this cycle is already behind us.

What does that mean if you're deciding between these options? 

If you've been holding off on a cash-out refinance in hopes of a bigger rate drop later this year, that drop may not be coming. That strengthens the case for a home equity loan or HELOC if your current mortgage rate is already below 6.4%. 

If your current rate is at or above that level, there's less reason to keep waiting, since further improvement isn't the sure thing it looked like a few months ago.
 

Take the Next Step Today

Cash-out refinance, home equity loan, or HELOC — there's no universally "right" answer, only the one that matches your rate, your timeline, and how you plan to use the funds. What matters most is running your actual numbers.

That's where a conversation with a loan officer can help. Our loan officers can walk through your current rate, your equity, your goals and help you land on the best option.

Ready to see what your equity could do for you?

Apply Now or call an Onity Mortgage loan officer at 1-877-319-0577 to review your options.

Any equity cashed out in refinance will increase the mortgage balance owed on the property. Rates are not guaranteed and based on the applicant’s credit history at the time of application.