When you need money from the equity in your home, you usually have two choices:

1. Cash-Out Refinance

This replaces your entire current mortgage with a brand-new, larger mortgage. You get the difference back in cash and use it to pay off debt or cover expenses.

+ One new loan replaces your old mortgage
+ You may get a lower interest rate (if today’s rates are better than your current one)
– You restart your mortgage term (example: moving from year 12 of a 30-year loan back to year 1 of a new 30-year loan)
– Higher closing costs, since you’re doing a full refinance

2. Fixed Rate Home Equity Loan (HEL)

This is a second loan on top of your existing mortgage. You keep your current mortgage as-is and add a fixed-rate, fixed-payment loan to cover your new needs.

+ Don’t restart your mortgage — keep the progress you’ve already made
+ Lower closing costs compared to a full refinance
+ Predictable payments with a fixed rate and term
+ Typically costs are lower overall because you’re only borrowing what you need
– Two monthly payments (your mortgage + HEL) instead of one

Which One is Right for You?

It depends on your situation:

* If today’s interest rates are much lower than your current mortgage, a cash-out refinance might make sense.
* If rates are higher (like in today’s market) and you’ve already built years into your mortgage, a home equity loan often saves you money and time.

Smart With Debt Tip: The calculator above runs the numbers side-by-side. It shows you the cost over time of a cash-out refinance versus a home equity loan — so you can decide which option saves you the most now and protects your financial future.