Refinance vs. Home Equity Line of Credit (HELOC): What's the Difference?

When it comes to tapping into your home's value, two of the most popular options are a refinance and a home equity line of credit (HELOC).While they both allow you to access cash based on your home's equity, they work very differently — and choosing the right one depends on your financial goals.

Let’s break down the key differences so you can make an informed decision.

What is a Refinance?

A refinance replaces your current mortgage with a brand-new loan — typically with new terms, a new interest rate, and a new monthly payment.

You might choose to refinance for several reasons:

• To lower your interest rate

• To reduce your monthly payment

• To change your loan term (for example, from 30 years to 15 years)

• To switch from an adjustable-rate mortgage (ARM) to a fixed-rate mortgage

• To take cash out — known as a cash-out refinance

In a cash-out refinance, you borrow more than you owe on your existing mortgage and take the difference in cash. That cash can be used for home improvements, debt consolidation, education costs, or other major expenses.

What is a Closed-End HELOC?

A closed-end home equity line of credit is a type of second mortgage that gives you a lump sum at closing, with a fixed repayment schedule and typically a fixed interest rate.

Unlike a traditional open-ended HELOC where you can borrow repeatedly during a draw period, a closed-end HELOC provides the full amount upfront. Repayment begins immediately based on a structured, predictable plan.

Your existing first mortgage remains unchanged.

Benefits of a Closed-End HELOC

• Access a lump sum without refinancing your first mortgage

• Fixed interest rate and fixed monthly payments

• Generally lower upfront costs compared to a full refinance

• No impact on your current first mortgage rate or terms

Key Differences at a Glance

Feature	Refinance	Closed-End HELOC
Type of Loan	New first mortgage	Second mortgage
Access to Funds	Lump sum at closing	Lump sum at closing
Repayment Terms	One new mortgage payment	Separate fixed monthly payment
Interest Rates	Lower rates possible	Fixed rate, usually slightly higher
Impact on Existing Mortgage	Replaces existing mortgage	Leaves first mortgage intact

Which One is Right for You?

You might consider a refinance if you want to:

• Lower your first mortgage interest rate

• Adjust your loan term

• Consolidate into one payment

• Maximize the amount of cash you take out

You might prefer a closed-end HELOC if you:

• Want to keep your existing first mortgage because it has a favorable rate

• Need a fixed, predictable repayment plan

• Want to avoid the larger closing costs associated with refinancing

Which One is Right for You?

You might consider a refinance if you want to:

• Lower your first mortgage interest rate

• Adjust your loan term

• Consolidate into one payment

• Maximize the amount of cash you take out

You might prefer a closed-end HELOC if you:

• Want to keep your existing first mortgage because it has a favorable rate

• Need a fixed, predictable repayment plan

• Want to avoid the larger closing costs associated with refinancing

Final Thoughts

Both refinancing and obtaining a closed-end HELOC can be excellent ways to access the equity in your home — but the right option will depend on your current mortgage, financial situation, and future plans.

Ready to Get Started?

Whether you are looking to refinance or explore a closed-end HELOC, our team is ready to guide you through every step.We will help you understand your options, answer your questions, and create a solution tailored to your financial goals.

Contact us today for a personalized consultation and take the first step toward making the most of your home’s equity.

Call us now or apply online to get started — your future is waiting.

Apply Now