Cash-Out Refi vs Home Equity Loan

Real estate ownership provides a variety of ways to borrow money against a property. Unlike buying a home, where you might have obtained a mortgage loan with a low down payment, you may be interested in knowing the maximum amount that you can borrow against your home. You can compare the benefits of a cash-out refinance versus a home equity loan to determine which program is ideal for your situation.

Borrowing Money Against Your Home

Is it wise to borrow money against your home? Perhaps, your home is nearly paid off, and you have less than five years remaining on an existing mortgage loan. Maybe, you are ready to retire soon, and the thought about starting over with a 30-year mortgage loan is frightening.

Homeownership provides an opportunity for you to decide on the best path toward reaching your financial goals.

Benefits of Getting a Cash-Out Refi

When your monthly bills are consuming a greater portion of your income than you are comfortable with, a cash-out refi might provide some relief. Instead of applying for a second mortgage, a home equity line of credit or a personal loan, a cash-out refinance could enable you to replace your current mortgage loan with a larger home loan.

In many instances, you may be able to reduce your current debt by several hundred dollars per month. Although, if your goal is to obtain cash out of your home for other purposes, it is a great way to borrow money at a very low rate of interest.

For example, if you obtained a 30-year fixed-rate mortgage for $180,000 at 6%, your principal and interest payment would equal $1,079 per month. If you also have a combined total of high-interest debt that amounts to roughly $15,000, you might spend more than $300 per month toward the bills.

Securing a $200,000 cash-out refi for 30 years fixed would result in monthly principal and interest payments of $1,074 at 5% -- thereby reducing your monthly outlay by more than $300 per month.

Advantages of a Home Equity Loan

If you need money to pay for certain property improvements, such as a new roof, cosmetic upgrades, to purchase some new appliance or to pay off a relatively small amount of debt, a home equity loan might provide an ideal solution.

Since, your cost to obtain a mortgage loan is largely based on the size of your loan, a home equity loan of $20,000 should have a minimal amount of fees. Also, if you have fewer than five years to pay off an existing mortgage loan, a home equity loan might make sense for your current situation.


Whether you decide to apply for a cash-out refi or for a home equity loan, it is wise to think about your long-term goals and your short-term goals. It is a good idea to consider if you will sell your home soon or if you plan to maintain your home for more many years.

Also, you might have greater tax breaks with a cash-out refi versus a home equity loan that you should discuss with a tax professional.

Prospect Financial Group invites you to apply online for one of our mortgage loans. One of our licensed mortgage experts will follow up with you to discuss ways that we may be able to help you secure the financing that you need.


Jason Vondrak

Company President

Prospect Financial Group

948 Garnet Avenue

San Diego, CA 92109

NMLS: 349089 | BRE: 01837707

Jason Vondrak has been in the mortgage industry since 2004 and co-founded the mortgage brokerage Prospect Financial Group in 2006 in San Diego, California. Today he serves as President and CEO of Prospect Financial Group and the president and founder of Prospect Property Group, a real estate development company, established in 2012.

"I've had the privilege to serve in an industry that exists to ensure homeownership remains among the top priorities of government and citizens alike. Over the years, it has been a pleasure working alongside homeowners, real estate professionals, and business associates combining efforts and teaming up to help homeowners realize the dream of home ownership."