A lot of Utah homeowners are sitting on two things at once: a first mortgage with a rate they'd never get today, and a big chunk of equity from years of rising home values. If you need cash for a remodel, a basement finish, tuition, or paying off higher-interest debt, the way you tap that equity matters.
There are three main options. Here's how they compare.
The short version
| HELOC | Home equity loan | Cash-out refinance | |
|---|---|---|---|
| What it is | A revolving line of credit, like a credit card secured by your home | A one-time lump sum | A new first mortgage that replaces your current one |
| Your current first mortgage | Stays as-is | Stays as-is | Gets paid off and replaced |
| Rate type | Usually variable | Usually fixed | Fixed or adjustable |
| How you get the money | Draw what you need, when you need it | All at once at closing | All at once at closing |
| Best for | Projects paid over time, or an emergency cushion | One known expense with a predictable payment | When your current rate isn't much below today's |
HELOC: flexible, usually variable
A home equity line of credit lets you borrow up to a limit, pay it back, and borrow again during a "draw period." You only pay interest on what you've actually drawn.
Good fit if: you're paying a contractor in stages, you don't know the exact total yet, or you want a backup line for emergencies.
Watch for: variable rates that can rise, and what happens when the draw period ends and principal payments start. Ask exactly how and when the payment changes.
Home equity loan: fixed and predictable
A home equity loan, also called a closed-end second mortgage, gives you one lump sum with a fixed payment over a set term. It sits behind your first mortgage.
Good fit if: you know exactly what you need, like a specific remodel bid or a set of balances to pay off, and you want a payment that never changes.
Watch for: you start paying interest on the full amount right away, even if you won't spend it all for months.
Cash-out refinance: one new loan
A cash-out refinance replaces your current mortgage with a larger one and gives you the difference in cash. Learn more on our cash-out refinance page.
Good fit if: your current rate is close to or higher than today's rates, you want a single payment instead of two, or you need to change the loan anyway, for example to remove a co-borrower or get out of FHA mortgage insurance.
Watch for: if your current rate is low, refinancing it away can cost more over time than the cash is worth. You also pay closing costs on the whole new loan, not just the cash portion.
Why your current rate is the deciding factor
Here's the question that settles most of these decisions: how does your current first-mortgage rate compare with today's rates?
- If your current rate is well below today's, a HELOC or home equity loan usually wins, because you keep the low rate on most of what you owe and only pay a higher rate on the new money.
- If your current rate is near or above today's, a cash-out refinance can make more sense, because you're not giving anything up.
Our refinance break-even calculator can help you see how long it would take for a refinance to pay for itself.
Questions to ask before you borrow
- What will the total payment be on the first and second mortgages combined?
- Is the rate fixed or variable, and how can it change?
- What are the closing costs, and are there annual fees or early-closure fees?
- How long do you plan to stay in the home?
- If you're consolidating debt, what's your plan to keep the old balances at zero?
Talk it through
We offer all three: HELOCs, closed-end second mortgages (home equity loans), and cash-out refinances. That means we can price each one for your situation and show you the trade-offs side by side, instead of steering you toward the only product we have. Book a free call and bring your current mortgage statement.