Home Equity Loan vs Cash-Out Refinance Calculator Method and Formula

Formula in plain language

Each loan uses standard fixed-rate monthly amortization. The keep-first-mortgage route combines remaining first-mortgage interest, home-equity-loan interest and entered fees; the cash-out route combines replacement-loan interest and entered closing costs.

Compare written Loan Estimates, APR disclosures, cash-to-close, lien position, tax advice, prepayment terms and whether extending the old balance over a longer term increases total interest.

Documents and inputs

Collect the current statement, policy declarations, illustration, valuation, offer or disclosure that controls each input. The most useful evidence is dated, identifies the jurisdiction and distinguishes cash paid now from amounts financed, deducted or merely illustrated.

• Current home value: User-entered planning value; a lender appraisal may differ.
• Existing first-mortgage balance: Current principal balance.
• Existing first-mortgage note rate: Contract rate used for the remaining schedule.
• Existing mortgage months remaining: Scheduled months remaining.
• Cash needed: Net additional borrowing before entered fees.
• Home-equity loan rate: Fixed annual rate for the second-loan scenario.

Worked boundary example

At zero interest with equal ten-year terms, 120,000 plus 60,000 produces the same 1,500 monthly debt service under either structure. Fees of 1,000 versus 2,500 create a 1,500 cost difference.

Change only one input at a time when testing sensitivity. That makes it possible to explain whether a change came from rate, term, valuation, limits, fees, a deductible or a non-guaranteed assumption.

Compare like with like

Keep the same date, currency, principal or exposure, comparison horizon and benefit scope. A payment comparison is incomplete without total scheduled cost and remaining balance; an insurance comparison is incomplete without limits, deductibles, exclusions and whether a displayed value is guaranteed.

Save the base case and an adverse case. Record which result changed, by how much, and which source input caused it.

Risks and false precision

The tool excludes tax deductibility, approval, credit pricing, points, financed fees, escrow, mortgage insurance, variable rates, recasts, home-equity lines, daily interest and the opportunity cost of cash fees.

Do not backsolve a desired answer by changing undocumented assumptions. Round only for display, and expect lender, insurer or contract calculations to differ because of timing, daily interest, policy terms, valuation methods or eligibility rules.

Practical next steps

1. Copy the inputs from current documents.
2. Run the documented base case.
3. Run one higher-cost or lower-benefit case.
4. Compare the result with the official quote, schedule or illustration.
5. Write down unresolved questions.
6. Ask the responsible lender, insurer, regulator, tax professional, surveyor or adviser before acting.

Questions to ask

• Why can refinancing be costly even at a lower payment?
• Does the tool compare a HELOC?
• Which inputs can change before completion or renewal?
• Which fees, exclusions, policy limits or lender overlays are missing?
• What written document will control if this estimate differs?

Primary sources and review status

• CFPB — Alternatives to a HELOC
• CFPB — Using home equity to meet financial needs
• CFPB — Cash-out refinance and debt paydown research
• CFPB — What is a HELOC?

Primary-source, formula, fixture, boundary, content, link and responsive-browser QA was completed on 2026-10-19 by CalculatorGeek Algorithmic Team at the site owner's request. No lender, insurer, regulator or cited organization reviewed or endorsed this CalculatorGeek material. Current written contracts, policy forms, regulations, valuations and professional advice control.