NEW YORK, NY — Homeowners with equity are weighing three common ways to pull cash from their homes: a HELOC, a home equity loan or a cash-out refinance. Bankrate says the decision depends less on the loan label and more on the rate a borrower already has compared with what lenders are offering now.
The site says homeowners are sitting on a record $18 trillion in home equity, and it points to August 2026 figures showing a $212,000 average amount of equity available to U.S. homeowners, according to ICE Mortgage Monitor. Bankrate also says borrowers who locked in a mortgage between 2020 and 2022 may be especially likely to have a rate below 4%, which makes replacing that loan more consequential.
What The Loans Do
Bankrate describes the three products as different ways to borrow against the same property. A HELOC works like a revolving credit line, usually with a variable rate and a draw period that can last up to 10 years, followed by a repayment period. A home equity loan is a lump sum borrowed at a fixed rate and paid back over a set term, often five to 30 years.
A cash-out refinance works differently because it replaces the existing mortgage with a new, larger one. The homeowner gets the difference in cash at closing, but the whole mortgage balance is reset at the new rate. Bankrate says that is the key issue for borrowers who already have a low mortgage rate they want to keep.
The site also says that in 2025, 87% of borrowers did not get the most competitive rate available to them. Bankrate’s Hidden Homeownership Tax research puts the average cost of that mismatch at $3,343 a year, or $278 a month, and says it can add up to $78,186 in extra interest over 30 years.
Why Rate Gaps Matter
Bankrate says the math changes depending on whether a homeowner’s current mortgage rate is above or below today’s average. If the existing rate is already worse than the market, a cash-out refinance can improve the mortgage while providing cash at the same time. If the current rate is well below today’s average, a HELOC or home equity loan may be more attractive because it leaves the original mortgage untouched.
That tradeoff matters because Bankrate says today’s average mortgage rates are in the high 6% range, while many 2020 to 2022 borrowers are still below 4%. Tim Choate, founder and CEO of Red Awning, says there is no one-size-fits-all answer because each option has different risk, flexibility and payment features. Michael Foguth of Foguth Financial Group says HELOCs often offer higher borrowing limits than credit cards and lower rates than card debt, but they still require underwriting and can take weeks to fund.
What Borrowers Should Check
For homeowners, the practical next step is to compare the current mortgage rate with today’s average and then look at the total cost of borrowing, not just the monthly payment. Bankrate says cash-out refinances often carry closing costs of 2% to 5% of the loan amount, and on a $300,000 loan that can equal $6,000 to $15,000. It also notes that refinance borrowers overpaid more often than many expect in 2025, with 78.7% paying above the most competitive rate.
Bankrate says HELOCs may fit borrowers who want to draw money over time, while home equity loans suit people who want a fixed payment on a one-time expense. A cash-out refinance may fit borrowers who want one mortgage payment and a new rate, but it can also raise long-term costs if the old mortgage rate was already favorable. Readers can compare lender quotes, run refinance calculators and check the latest rates before applying.
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