HELOC vs. Cash-Out Refinance Calculator

HELOC Cost

The HELOC is modeled in two phases, both at the same quoted interest rate:

Draw period (interest only):

Monthly payment = drawAmount × (annualRate ÷ 12)
Draw period total interest = monthly payment × (drawYears × 12)

Repayment period (P&I amortization on full draw amount):

Monthly payment = drawAmount × mf(annualRate, repaymentYears)
Repayment interest = total repayment payments − drawAmount

HELOC total cost = draw interest + repayment interest (no closing costs assumed)

Cash-Out Refi Cost

The refi models the borrowed amount as a standard amortizing mortgage:

Monthly payment = drawAmount × mf(refiRate, refiTerm)
Total interest = monthly payment × refiMonths − drawAmount
Total cost = total interest + closing costs

Break-Even

The break-even month is the first month at which cumulative refi cost (accrued interest + closing costs) drops below cumulative HELOC interest. This happens when the refi's lower ongoing interest rate generates enough savings to recover the upfront closing costs.

Chart

The cumulative cost chart tracks total interest paid (plus closing costs for refi) year by year. The HELOC line starts at zero and rises slowly during the draw period (interest-only), then accelerates during repayment. The refi line starts at the closing cost amount and rises steadily. The crossing point (if any) is the break-even year.

1. Deciding Between HELOC and Refi for a Home Renovation

Enter the renovation budget as the draw amount, your current HELOC quote and refi quote, and the expected term. The total cost comparison shows which route is cheaper in absolute terms. Pay attention to the break-even year: if you plan to sell or refinance again in 5 years, a refi that breaks even in 7 years is actually more expensive in practice.

2. Evaluating Whether Your Existing Rate Is Worth Protecting

If your current mortgage rate is well below today's refi rates, a cash-out refi forces you to give up that rate on the entire existing balance — a cost this calculator does not model. Use this tool to evaluate the equity-access portion only, understanding that the full refi picture may tip further in the HELOC's favor if you have a sub-4% existing mortgage.

3. Modeling the Effect of HELOC Rate Changes

HELOCs are variable rate. Run the comparison twice: once at the current prime-based rate, and once at prime + 2% to simulate a rising-rate scenario. If the HELOC still wins under the higher-rate scenario, the flexibility and low upfront cost make it the stronger choice. If the refi wins under either scenario, locking in a fixed rate has compounding benefits.

4. Sizing the Closing Cost Trade-Off

Change the closing costs input to see how sensitive the break-even is to the exact fee amount. Lenders often allow you to roll closing costs into the loan or pay discount points — modeling different cost levels helps you decide whether to negotiate hard on the refi fees or simply choose the HELOC instead.