What’s the Difference Between Cash-Out Refinance and Home Equity Loan?

What’s the Difference Between Cash-Out Refinance and Home Equity Loan?

Senior Loan Officer
Brian Decker
Published on December 21, 2022

What’s the Difference Between Cash-Out Refinance and Home Equity Loan?

When you need cash to cover damages, repairs, projects, or home renovations for your home, you can release the money you've invested in your mortgage through mortgage refinancing. Let's dive into the different ways to go about refinancing your mortgage.

Types of Refinancing

There are two common ways to refinance your mortgage:

Cash-Out Refinancing

  • Pays off your previous mortgage in exchange for a new mortgage at a lower interest rate
  • Pays out some of the equity in your home as cash
  • Could be eligible for up to 125% of your home's value
  • Requires a high credit score to qualify 
  • Ideal for homeowners looking to stay in their home for at least the following year, or homeowners who need a significant amount of money for home renovations to sell the properties

Home Equity Loans

  • Cash as a separate loan in exchange for the equity you've built up in your property
  • No high credit score is needed
  • The lender can come for your home if you default
  • Has two options: a traditional home equity loan or a home equity line of credit (HELOC)
  • Opens your property to two creditors

Why Refinance?

The two main reasons people look to refinance their mortgages are to lower the overall cost of their mortgage or to release some potentially wasted equity. For example, let's say you purchased your home 20 years ago when interest rates were 5% for a 30-year fixed-rate mortgage. Now, the interest rate is 3% for a mortgage. If you refinance now, you could save thousands of dollars in your final 10 years of payments. You could also potentially reduce the amount of time left on your mortgage.


In conclusion, cash-out refinancing and home equity loans can benefit homeowners who want to turn the equity in their homes into liquidated resources for immediate projects, renovations, damage control, or other home improvements. In order to decide which route of refinancing is right for you, work with a professional mortgage company or experienced loan officer to help guide you through the process with ease.

Modern Lending

Refinancing your mortgage can be a tricky situation, but the professional loan officers and mortgage specialists at Modern Lending can help you refinance your home with no problem. Call us or visit our website for more information on how to get started and take advantage of refinancing options today!

Senior Loan Officer
Brian Decker Senior Loan Officer
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