💰 What Is a Cash-Out Refinance?
🧭 Does a Cash-Out Refinance Make Sense in Today’s Market?
Two ways to tap into your home’s equity — but only one may truly fit your goals.
Your home is likely your biggest financial asset — and if you’ve built up equity, you may be wondering:
👉 Should I do a cash-out refinance or get a home equity loan?
Both options let you access your equity as cash — but they work differently, come with different tradeoffs, and are better suited to different goals.
Let’s break down the key differences, pros, and ideal use cases for each — so you can make the best move for your situation.
💰 What Is a Cash-Out Refinance?
A cash-out refinance replaces your existing mortgage with a new, larger one. You pay off your current balance and take the difference out as cash.
For example:
- Home value: $500,000
- Current mortgage: $300,000
- New loan: $400,000
- You receive $100,000 in cash (minus closing costs)
You’ll now have one mortgage payment, at a new rate and term.
💸 What Is a Home Equity Loan?
A home equity loan is a second mortgage — a completely separate loan that sits on top of your current mortgage.
You keep your original loan and payment, and the equity loan gives you a lump sum of cash to repay over a set term (typically 5–30 years) with a fixed interest rate.
💡 You now have two monthly mortgage payments instead of one.
🧮 Side-by-Side Comparison
| Feature | Cash-Out Refi | Home Equity Loan |
|---|---|---|
| Loan type | Replaces existing mortgage | Second mortgage |
| Rate | Typically lower | Typically higher |
| Term | Resets full loan term | Separate term |
| Monthly payments | One | Two |
| Closing costs | Higher | Lower (usually) |
| Use of funds | Any purpose | Any purpose |
| Best for | Simplifying debt, large sums | Shorter-term, smaller cash needs |
✅ When a Cash-Out Refinance Makes More Sense
- You want one payment, not two
- You’d benefit from refinancing your current mortgage anyway (better terms, drop PMI, etc.)
- You’re accessing a large amount of cash
- You have significant equity and plan to stay in your home
A cash-out refi often offers the lowest long-term cost, even if the upfront closing costs are slightly higher.
✅ When a Home Equity Loan Might Work Better
- You already have a great rate on your first mortgage
- You only need a small amount of cash
- You don’t want to restart your mortgage term
- You’re comfortable managing two payments
A home equity loan can be faster and lower-cost upfront — but often comes with higher interest and less flexibility long term.
🧠 What About a HELOC?
A Home Equity Line of Credit (HELOC) is similar to a home equity loan but acts more like a credit card secured by your home. It offers flexible access to funds, often with a variable interest rate.
We’ll cover HELOCs in a future post — or just reach out and we’ll walk you through all three options side by side.
🏢 Why PRMI?
At PRMI, we’re not here to push one product over another.
We help you:
- Understand all your options — cash-out, home equity, or even HELOC
- Run the long-term numbers, not just quote interest rates
- Structure your loan around your life goals, not just the loan balance
As a direct lender, we handle the entire process in-house — quickly, clearly, and with your best interest at the center.
👇 Not Sure Which Is Right for You?
Let’s compare side by side — and help you access your equity the smartest way possible.