Home Equity vs Cash-Out Breakeven Planner

Compare a HELOC draw with a cash-out refinance to see which option keeps more cash in your pocket. The planner contrasts the interest-only HELOC payment with an amortized cash-out payment, layers in optional closing costs, and reports the breakeven months, years, and monthly savings when refinancing wins.

Total equity draw you plan to access via HELOC or cash-out refinance.
Annual percentage rate expected for the HELOC draw during the interest-only phase.
Fixed rate offered on the new mortgage after cashing out equity.
Defaults to $0 when left blank; include lender, appraisal, and title fees if known.
Defaults to 30 years for the amortized cash-out portion of the loan.

Calculations assume fully amortizing mortgage payments with fixed rates. Taxes, insurance, and future rate changes are not included.

Examples

  • $60,000 cash needed, HELOC at 8.50%, refinance at 6.75%, $4,200 closing costs, 30-year term ⇒ HELOC interest-only runs $425.00 per month, while the amortized cash-out payment is $389.16. With $4,200.00 in closing costs, you break even after 118 months (9.8 years), and every month after that saves $35.84 compared with keeping the HELOC.
  • $40,000 draw, HELOC at 9.25%, refinance at 6.00%, no closing costs, 20-year term ⇒ HELOC interest-only runs $308.33 per month, while the amortized cash-out payment is $286.57. With $0.00 in closing costs, you break even after 0 months (0.0 years), and every month after that saves $21.76 compared with keeping the HELOC.

FAQ

How should I estimate the HELOC rate if it is variable?

Use the average rate you expect over the period you plan to hold the balance. Rerun the calculator with higher and lower scenarios to see how rate swings affect the breakeven timeline.

Can I include the rest of my mortgage balance in the comparison?

Yes. The planner isolates the incremental cash you are withdrawing, so you can focus on which option is cheaper for that draw. To compare total mortgage payments, add the incremental savings from this tool to your existing mortgage analysis.

What happens if closing costs are financed instead of paid in cash?

Financing closing costs increases the refinance balance, so add them to the cash needed input. The breakeven output will still show how long it takes the lower payment to offset the financed cost.

Additional Information

  • HELOC cost assumes an interest-only draw with no principal reduction until you choose to repay the balance.
  • Cash-out payment is calculated with a fixed-rate amortization schedule over the supplied term (defaults to 30 years).
  • Closing costs are treated as a one-time expense that is recovered through the monthly savings difference between the two options.

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