What’s the typical interest rate difference between a HELOC and a cash‑out refinance right now?

As of the latest data, a variable‑rate HELOC hovers around 6.0% APR, while a 30‑year fixed cash‑out refinance sits at roughly 6.67%. The HELOC starts about 0.7 percentage points lower, but its rate can rise with market changes.

HELOC vs. Cash-Out Refi: Which Actually Makes Sense

August 15, 2026 · Researched and drafted with AI assistance; reviewed and approved by Richard Weigel

Is a HELOC cheaper than a cash‑out refinance?

A HELOC usually starts with a lower rate, but you only pay interest on the balance you actually use. Take the iconic Simpsons' 4‑bedroom home on Evergreen Terrace. If it were on the market today, a rough estimate would be $300,000. With a 30‑year fixed at 6.67%, the principal‑and‑interest payment sits around $1,950 per month, plus about $300 in annual property tax. Assuming the family has paid down the loan to $210,000, they’ve built roughly $90,000 of equity.

If they tap $30,000 via a HELOC at a variable 6.0%, the interest alone is $150 a month as long as they keep the balance. No closing costs, no new amortization schedule.

A cash‑out refinance would roll the $30,000 into a new 30‑year loan of $330,000 at 6.67%. The new payment climbs to about $2,080 plus the same tax bill, and the homeowner typically pays $3,000‑$4,000 in closing fees. Over the first five years, the HELOC costs roughly $9,000 in interest, whereas the refinance adds about $11,000 in interest and the upfront fees. For a modest draw and short‑term need, the HELOC wins.

Can I treat a HELOC like a credit card?

Yes, you can draw, repay, and draw again, but the interest is calculated daily and the rate can change with the market.

Pros: Flexibility to borrow only what you need; no large closing costs; interest is tax‑deductible if used for home improvements.
Cons: Variable rates can climb above 7% in a rising market; minimum monthly payments may be interest‑only, which can feel like a revolving‑door debt if you don’t discipline yourself.

When does a cash‑out refinance actually win?

It makes sense when you need a sizable, fixed‑rate lump sum and you have enough equity to keep the new loan‑to‑value below 80%. Imagine the crew from Stranger Things buying the Hawkins house for $500,000 in 2020. After a few years they’ve paid down to $350,000, leaving $150,000 equity. A $100,000 cash‑out refinance at 6.67% would add about $630 to the monthly payment, but the rate stays locked for the life of the loan. If they plan to stay 10+ years, the predictable payment often outweighs the $3,500 in closing costs.

How do I decide which tool fits my situation?

Start with three questions:

How much money do I need? Small (<$25k) and short‑term needs favor a HELOC. Large (>$50k) needs lean toward a refinance.
How long do I plan to stay in the house? If under five years, the HELOC’s lower upfront cost usually wins. Over five years, a fixed‑rate refinance can become cheaper despite the closing fees.
Can I tolerate a variable rate? If you prefer certainty, lock in a refinance; if you’re comfortable watching the market, the HELOC gives you flexibility. Run the numbers, compare total interest over your expected horizon, and factor in any closing‑cost amortization. The math will tell you which side of the ledger is lighter.

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Sources

Freddie Mac PMMS, the real 30-year fixed rate used throughout this piece.
Every other figure above (HELOC rate, property tax, closing costs, home-price examples) is our own illustrative estimate, not a verified fact from a named source.