Homeowners often choose between a cash out refinance and a home equity loan when tapping into home equity. While both provide access to cash, they function differently.

Cash Out Refinance Overview
This option replaces your existing mortgage with a new one. It often comes with lower interest rates and a single monthly payment.

Home Equity Loan Explained
A home equity loan is a second mortgage with a fixed interest rate and separate payment. It does not replace your original mortgage.

Interest Rates and Costs
Cash out refinancing generally offers lower rates but higher closing costs. Home equity loans may have slightly higher rates but lower upfront expenses.

Payment Structure
Refinancing resets your mortgage term, while a home equity loan adds another payment.

Choosing the Right Option
If you want lower rates and one payment, refinancing may be better. If your current mortgage rate is low, a home equity loan might be preferable.

Final Verdict
Each option has advantages depending on financial goals and current mortgage terms.