A HELOC is a line of credit you can draw on multiple times, up to a maximum. A home equity loan is one lump sum. A cash-out refinance replaces your first mortgage with a larger one. The redraw test asks whether money you repay can be borrowed again. No regulator we read names one of the three as cheaper.
Not financial, tax or legal advice. A HELOC is secured by your home, and a home equity loan and a cash-out refinance are also mortgages on it. This page compares structures and gives no rate, fee or payoff figures; your lender’s terms decide what applies to you.
Are these three products the same thing at different prices?
No. They are three structures, not three prices for the same loan. One is a line you can draw on again, one is a single lump sum, and one replaces your first mortgage. So sort them by what you can do afterward (borrow again, keep your current first mortgage, refinance the first later) before you compare any rate.
The Consumer Financial Protection Bureau (CFPB) describes a home equity loan as a specific amount of money paid to you as a lump sum, and a HELOC as a line of credit you can draw on multiple times up to a maximum, usually with an adjustable rate. If you already have a first mortgage, it calls both of them second mortgages (paraphrase; CFPB, home equity loan vs. HELOC page, dated August 28, 2026; accessed September 24, 2026). It describes a cash-out refinance as replacing your existing mortgage with a bigger one and taking the difference in cash (paraphrase; CFPB, page on similar loans, updated June 27, 2024; accessed September 24, 2026). If “chunk” and “HELOC path” are new terms, they are defined here.
| HELOC | Home equity loan | Cash-out refinance | |
|---|---|---|---|
| Structure | Line of credit drawn multiple times, up to a maximum | A specific amount, paid as a lump sum | Replaces the existing mortgage with a bigger one; you take the difference in cash |
| Can repaid money be borrowed again? (our inference) | Probably: it is described as a line drawn multiple times up to a maximum. Confirm in your lender’s terms that repaid amounts become available again | Not described that way: a single lump sum | Not described that way: one new mortgage |
| Effect on your existing first mortgage | Not replaced by the HELOC; the CFPB calls it a second mortgage if you have a first (our reading: it is added to the first) | Not replaced by the loan; the CFPB calls it a second mortgage if you have a first (our reading: it is added to the first) | Replaced by the new loan |
| Rate type | Usually adjustable, per the CFPB | Confirm with the lender | Confirm with the lender |
| Second-mortgage status | Yes, if you have a first mortgage | Yes, if you have a first mortgage | Replaces the first mortgage; ask the lender how the new lien is described |
| Closing costs | Ask the lender | Ask the lender | Ask the lender |
Rate type is a single table cell on purpose. How an index and a margin combine into a HELOC rate is on the rate mechanics page.
Which one lets me borrow the same money again?
Call this the redraw test: after you repay part of the balance, can that amount be borrowed again? The CFPB describes a HELOC as a line you draw on multiple times up to a maximum. We read that as passing the test by structure, but the summary we read does not say in so many words that repaid amounts are restored, so confirm it in your lender’s terms. A home equity loan is described as a specific amount paid as a lump sum, and a cash-out refinance as one new mortgage; those descriptions do not mention a repay-and-borrow-again feature.
Our reading, as editorial opinion rather than a sourced finding: a payoff method that pays mortgage principal with borrowed money, repays that borrowing from income, and then borrows again needs a revolving structure. If that reading is right, it is a requirement about structure, not a verdict on the method. Whether it beats plain extra payments depends on the numbers on the two-loan comparison and on what decides the result. Even a HELOC’s ability to be drawn again has a time limit set by the draw period; that page covers what changes when it ends.
What happens to my current mortgage rate?
A cash-out refinance replaces your existing mortgage, so the new loan carries whatever terms the lender offers. The CFPB calls a HELOC and a home equity loan second mortgages if you already have a first. We read that as meaning they are added to your first mortgage rather than replacing it (our inference; confirm with the lender). A first-lien HELOC works the other way: the line replaces the existing mortgage, so that loan and its rate end; see First-Lien HELOC: What Replacing Your Mortgage Means.
In a blog post dated December 21, 2022, the CFPB said home equity products may let a borrower avoid replacing a low-rate mortgage with a higher-rate cash-out refinance (paraphrase; CFPB, blog post, accessed September 24, 2026). Treat that as the CFPB’s view at the time, not as a statement about today’s rates. This page gives no rates. The trade-off to weigh is rate exposure on the line: the CFPB says a HELOC is usually adjustable, and what that can mean is on the rate mechanics page above.
Does a HELOC complicate refinancing my first mortgage later?
It can. The CFPB’s page on whether a HELOC affects your ability to refinance your first mortgage (page date February 2, 2024; accessed September 24, 2026; link) says, in paraphrase, that you may need your HELOC lender’s approval, that the lender can refuse, and that you may need to pay off the HELOC. These are possibilities the page names, not outcomes for your loan. This page does not go into lien-position or subordination wording, because the sources we read did not cover it: ask the HELOC lender in advance how it treats a later refinance of the first mortgage.
Which one costs less to open?
No regulator page we read names a cheaper product, and we found no primary source that supports saying HELOC closing costs are lower or higher than those of a cash-out refinance. So this page gives no typical amounts. What can be sourced is what Regulation Z requires a HELOC lender to disclose. First, its scope:
The requirements of this section apply to open-end credit plans secured by the consumer’s dwelling.
Open-end means a plan such as a HELOC. Within that scope, two disclosure lines are about fees on the plan:
(7) Fees imposed by creditor. An itemization of any fees imposed by the creditor to open, use, or maintain the plan, stated as a dollar amount or percentage, and when such fees are payable.
(8) Fees imposed by third parties to open a plan. A good faith estimate, stated as a single dollar amount or range, of any fees that may be imposed by persons other than the creditor to open the plan, as well as a statement that the consumer may receive, upon request, a good faith itemization of such fees. In lieu of the statement, the itemization of such fees may be provided.
Those two lines apply to open-end plans. This page does not say they apply to a home equity loan or a cash-out refinance; the rules that apply to those products were not opened for this page. For all three products, ask each lender for an itemized list of fees in writing and compare like with like. Rate mechanics for the HELOC column are on the rate sheet page.
What can’t this page tell me?
Four things we could not source on the publication date, so the answer is ask the lender: the wording of lien position or subordination for each product; whether a home equity loan rate is fixed or adjustable at your lender; how Fannie Mae and Freddie Mac rules treat a cash-out refinance; and what fees apply. It also does not tell you what you would qualify for. How lenders look at combined loan-to-value and credit scores is on HELOC Qualification: CLTV, Credit Score, Lender Rules.
A checklist to take to each lender, in writing:
- Rate type, and if it is adjustable, what it is tied to and when it can change.
- Loan term, and for a line, the draw and repayment terms (the questions to ask on a HELOC).
- Any limit on how often or how much you can draw, and whether repaid amounts become available again.
- An itemized fee list: what is charged by the lender and what by third parties.
- Any fee for closing the account early.
- What happens to your current first mortgage, and for a HELOC, how the lender treats a later refinance of it.
Key terms
- Revolving credit
- Credit you can borrow, repay and borrow again up to a maximum. The CFPB describes a HELOC as a line you can draw on multiple times up to a maximum.
- Lump-sum loan
- A specific amount paid to you at once. The CFPB describes a home equity loan this way.
- Cash-out refinance
- A new, bigger mortgage that replaces your existing one, with the difference paid to you in cash.
- First mortgage
- The mortgage you already have on the home.
- Second mortgage
- A loan secured by the same home in addition to a first mortgage. The CFPB uses the term for both home equity loans and HELOCs.
- Redraw
- Borrowing again an amount you have repaid. The redraw test on this page checks for it.
- Closing costs
- Fees to open a loan. Which fees apply and how much they are varies by lender; ask for an itemized list.
Frequently asked questions
Is a home equity loan a second mortgage?
If you already have a first mortgage, the CFPB describes both a home equity loan and a HELOC as second mortgages (page dated August 28, 2026; accessed September 24, 2026).
Can I keep my current mortgage rate if I open a HELOC?
The CFPB calls a HELOC a second mortgage if you already have a first. We read that as meaning it is added to your first mortgage rather than replacing it (our inference; confirm with the lender). The HELOC has its own rate, which the CFPB says is usually adjustable.
Is it harder to refinance my first mortgage later if I have a HELOC?
The CFPB page says you may need the HELOC lender’s approval, the lender can refuse, and you may need to pay off the HELOC. Ask your lender how it handles this.
Which of the three is cheapest?
We found no regulator source that answers this, so this page does not. Compare itemized fees, rate type and term in writing.
Which page answers your question?
- What changes when a line’s draw period ends, and what to ask before opening one: HELOC draw period vs repayment period.
- How a HELOC rate is built and where to find each line in your paperwork: How HELOC interest rates work.
- What a rate rise, a frozen line or the end of the draw period could do, with model numbers: Velocity banking risks.
- Whether a HELOC beats plain extra payments on two example loans: Does velocity banking work?
- To run your own mortgage numbers: the spreadsheet. For the three tests: the overview.
- To log real chunks and payments as they happen, our Velocity Mortgage App has a chunk tracker for subscribers; its projection compares the HELOC path with minimum payments only, so it does not check whether you would qualify for a HELOC or any other product.
Sources and method
- Regulation text: 12 CFR 1026.40, eCFR, current as of September 23, 2026; the first sentence and paragraphs (d)(7) and (d)(8) are copied verbatim. Section 1026.40 covers open-end plans; it is not applied here to home equity loans or cash-out refinances.
- CFPB, home equity loan vs. HELOC page, dated August 28, 2026; paraphrased; accessed September 24, 2026.
- CFPB, page on similar loans (cash-out refinance description), updated June 27, 2024; paraphrased; accessed September 24, 2026.
- CFPB, blog post dated December 21, 2022; paraphrased; accessed September 24, 2026. It is the CFPB’s view at that date, not a current rate fact.
- CFPB, page on whether a HELOC affects refinancing your first mortgage, page date February 2, 2024; paraphrased; accessed September 24, 2026.
- Limits: no lender pages are used. No cheaper-product answer, typical fee, typical rate or lien-position wording appears because none could be sourced on the publication date. The closed-end disclosure rules for home equity loans and cash-out refinances, and Fannie Mae and Freddie Mac cash-out rules, were not opened. No model output appears on this page.
About the Author Michael
MBA in Quantitative Finance – Wharton School (University of Pennsylvania)."I built products for the banks. Now, I dismantle them for you."Michael Schmidt is a veteran financial strategist and the architect of the Mortgage Killer Method.With over 15 years of experience inside America's largest lending institutions, Michael worked behind closed doors structuring mortgage backed-securities. He saw firsthand how the "30-year fixed" system is engineered to prioritize institutional profit over homeowner equity.In 2015, Michael walked away from Wall Street with a clear objective: to reverse-engineer banking mathematics for the average American family. He specializes in aggressive principal reduction strategies, using HELOCs to cut amortization timelines by decades.Michael brings German precision to debt management. His frameworks are not theories—they are mathematical certainties. To date, he has helped over 1,500 families reclaim an estimated $50 million in interest from the banking system.Expertise: Strategic Debt Elimination, Amortization Mechanics, Cash Flow Optimization.Background: Former VP of Lending Strategies.
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