When homeowners find themselves in need of extra cash, using their home equity is often an attractive option. Two popular methods for tapping into home equity are Home Equity Lines of Credit (HELOC) and Cash-Out Refinancing. Though both options allow you to access your home’s equity, they function differently and come with their own set of risks, pros, and cons. In this article, we’ll explore these options and help you decide which one is right for you.

What is a HELOC?

A Home Equity Line of Credit (HELOC) is a revolving line of credit that allows you to borrow money against the equity you have built up in your home. With a HELOC, you can draw funds as needed, up to your approved credit limit. The interest rate on a HELOC is variable, meaning it can change over time based on market conditions.

Pros of a HELOC

  1. Flexibility: Borrow only what you need and repay at your own pace.
  2. Lower initial interest rate: HELOCs typically offer lower interest rates compared to fixed-rate loans.
  3. Tax-deductible interest: The interest you pay on a HELOC may be tax-deductible if the funds are used for home improvements.

Cons of a HELOC

  1. Variable interest rate: The interest rate can rise, increasing your monthly payments.
  2. Temptation to overspend: The revolving nature of a HELOC can lead to overspending and increased debt.
  3. Possible foreclosure: Failure to repay your HELOC could result in the loss of your home.

What is Cash-Out Refinancing?

Cash-Out Refinancing involves replacing your current mortgage with a new, larger loan. The difference between the two loans is paid out to you in cash, allowing you to use the funds for any purpose. With cash-out refinancing, you receive a fixed interest rate and a set repayment schedule.

Pros of Cash-Out Refinancing

  1. Fixed interest rate: Your interest rate will remain constant, providing predictable monthly payments.
  2. Lower interest rate: Refinancing often results in a lower interest rate compared to your original mortgage.
  3. One monthly payment: You only need to manage one loan payment, simplifying your finances.

Cons of Cash-Out Refinancing

  1. Closing costs: Refinancing typically involves paying closing costs, which can be expensive.
  2. Longer repayment period: Extending your mortgage term can lead to higher overall interest costs.
  3. Possible loss of equity: Borrowing against your home equity can put you at risk of owing more than your home is worth if property values decline.

How to Choose Between HELOC and Cash-Out Refinance

To determine which option is best for you, consider the following factors:

  1. Loan purpose: If you need funds for a specific project or expense, a cash-out refinance might be more appropriate. If you require ongoing access to funds, a HELOC could be a better fit.
  2. Interest rate preference: Are you comfortable with a variable interest rate or do you prefer the predictability of a fixed rate?
  3. Repayment timeline: Consider whether you can handle the extended repayment period that often accompanies a cash-out refinance.
  4. Tax implications: Consult a tax professional to understand how each option will impact your taxes.

Before making any decisions, it’s crucial to shop around and compare loan terms from multiple lenders, such as Quicken Loans. By understanding the pros and cons of HELOCs and cash-out refinancing, you’ll be better equipped to make an informed choice that aligns with your financial goals and needs.

Quicken Loans HELOC

Quicken Loans, a leading mortgage lender in the United States, offers various mortgage products, including HELOCs. They have a user-friendly online platform that allows you to apply for a HELOC, manage your account, and make payments conveniently. Keep in mind that terms and conditions, as well as interest rates, may vary based on your credit score, home value, and other factors.

Pros of Quicken Loans HELOC

  1. Online platform: Apply for and manage your HELOC through their user-friendly online portal.
  2. Competitive rates: Quicken Loans typically offers competitive interest rates and fees.
  3. Customer service: Access knowledgeable customer support via phone, chat, or email.

Cons of Quicken Loans HELOC

  1. Limited physical presence: Quicken Loans operates primarily online, which may be a drawback if you prefer in-person assistance.
  2. No pre-approval: Unlike some other lenders, Quicken Loans doesn’t offer pre-approval for a HELOC.


When deciding between a HELOC and a cash-out refinance, carefully consider your financial situation, loan purpose, and tolerance for risk. Keep in mind that both options involve using your home as collateral, so be cautious about how much you borrow and have a clear plan for repayment. Always consult with a financial advisor or mortgage professional to explore your options and make the best decision for your unique circumstances.