Refi vs. HELOC—Which is Best for Your Family?

Holding a calculator in hand

When you already own a home and have a mortgage, you have two options to consider should you ever need a little extra cash in your pocket: Refinance your current loan or apply for a home equity line of credit (HELOC).

But what’s the difference between the two and how do you know which is right in your specific situation? Let’s break it down.


When you apply for a refinance loan, you’re essentially closing out your current loan and opening up a new one. It may come with a different term (10-year or 15-year, instead of 30-year, for example), it could have a lower interest rate, or it might have both.

Generally, a refi is a great option if you’re looking to lower your monthly mortgage payment, as well as the amount of interest you’ll pay over the life of the loan. It’s ideal if interest rates have dropped since you originally applied for your mortgage, and it can save you serious cash over the entirety of your loan when timed properly.

If you’re considering a refinance, be sure to watch mortgage rates closely, and act quickly when rates drop below your current one.


A HELOC is a little different. It basically functions like a credit card, leveraging your equity to give you a flexible cash source you can draw from as needed. It does come with interest, just like a mortgage loan does, but it’s typically a little lower than what a refi would offer.

There’s a catch though: you’re not paying down your mortgage or lowering your payments at all through a HELOC. If you’re in need of a quick cash infusion, want funds to pay for home upgrades or renovations or find yourself in a financial bind, a HELOC can be a good option to save the day. It’s not, however, a great long-term solution for saving your household money.

Which is Best for You?

Are you wondering “should I refinance?” Are you considering a cash-out refinance to pay for renovations or your child’s college education? Contact Embrace Home Loans today. Our expert loan officers can walk you through the best options for your household and help you find the perfect solution for your financial goals.


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Aly Yale

Aly J. Yale is a freelance writer focusing on real estate, mortgage, and the housing market. Her work has been featured in Forbes, Bankrate, The Motley Fool, Business Insider, The Balance, and more. Prior to freelancing, she served as an editor and reporter for The Dallas Morning News. She graduated from Texas Christian University's Bob Schieffer College of Communication with a major in radio-TV-film and news-editorial journalism. Connect with her at or on Twitter at @AlyJwriter.