HELOC vs. Cash-Out Refinance: Which Strategy Grows Your Portfolio Faster?

You’ve built equity in your home or investment property—and now you’re ready to put that equity to work. But should you use a HELOC (Home Equity Line of Credit) or a cash-out refinance?

Both financing tools allow you to tap into your property’s value and reinvest it—but they serve different purposes, come with different terms, and suit different investing goals.

In this guide, we’ll break down the pros and cons of each strategy, help you choose the right fit for your situation, and show you how smart investors use these tools to scale their portfolios faster.

What’s the Difference Between a HELOC and a Cash-Out Refinance?

What Is a HELOC?

A HELOC is a revolving credit line secured by your home’s equity. You can draw from it as needed—similar to a credit card—during the “draw period” (typically 5–10 years), then repay during the “repayment period” (usually 10–20 years).

Example Use Cases:

• Funding a down payment on your next rental
  
• Financing BRRRR rehabs
  
• Paying holding or closing costs
  
• Making quick offers on off-market deals
  

📌 You only pay interest on what you borrow, and you can reuse the line after repayment.

What Is a Cash-Out Refinance?

A cash-out refinance replaces your existing mortgage with a new one, for more than what you owe. The difference is paid out to you as a lump sum.

Example Use Cases:

• Large capital injections to buy multiple properties
  
• Consolidating other high-interest debt
  
• Locking in long-term fixed rates
  
• Repositioning an asset for long-term hold
  

📌 Interest is paid on the full amount borrowed from day one—no flexibility like a HELOC.

Pros and Cons: HELOC vs. Cash-Out Refi

✅ HELOC Pros:

• Retain your current low mortgage rate
  
• Access funds only when you need them
  
• Ideal for recurring projects or BRRRR
  
• Often lower upfront costs
  
• Reusable as you pay it back
  

❌ HELOC Cons:

• Variable interest rates can rise
  
• Shorter repayment terms = higher payments later
  
• Less suitable for large one-time needs
  

✅ Cash-Out Refi Pros:

• Lock in a long-term fixed rate
  
• Large lump sum available up front
  
• Combine equity access + better loan terms
  
• One monthly payment (vs. two with HELOC)
  

❌ Cash-Out Refi Cons:

• Higher closing costs
  
• You reset your mortgage term
  
• You may lose a great rate on your original mortgage
  
• Must refinance the entire loan, not just the equity portion
  

Which Strategy Builds Your Portfolio Faster?

It depends on your investing style, equity position, and short-term vs. long-term goals.

🟢 Use a HELOC If You:

• Want flexible access to funds over time
  
• Have a great interest rate on your current mortgage
  
• Plan to BRRRR or fund renovations
  
• Need a quick-close bridge before refinancing into DSCR
  
• Are actively investing and want ongoing liquidity
  

🟢 Use a Cash-Out Refi If You:

• Need a large lump sum for multiple acquisitions
  
• Want to refinance at a lower rate
  
• Are looking to reposition or stabilize a property
  
• Plan to hold long-term and want predictable payments
  
• Are consolidating debt or simplifying payments
  

Real-World Scenario

Investor A: House Hacker in Florida

• Mortgage: 3.2% on primary home
  
• Needs $50K for STR down payment
  ✅ Uses HELOC to avoid refinancing at a higher rate
  

Investor B: BRRRR Investor in Ohio

• Rental worth $220K, owes $120K
  
• Wants to pull out $80K for next 2 deals
  ✅ Uses cash-out refinance, locks in 30-year fixed rate at 6.5%
  

Pro Tip: Combine Both for Maximum Flexibility

You can use a cash-out refi on one property and set up a HELOC on another. This lets you:

• Deploy lump sums where needed
  
• Keep revolving credit for future repairs or acquisitions
  
• Reduce total interest costs by using HELOC only when necessary
  

Final Thoughts

Both HELOCs and cash-out refinances are powerful tools for unlocking equity and scaling your real estate portfolio. The right choice depends on:

• Your investment strategy (BRRRR, buy-and-hold, flipping)
  
• Your risk tolerance (fixed vs. variable rate)
  
• Your existing mortgage terms
  
• How fast—and how often—you plan to reinvest
  

Choose strategically, and you can turn idle equity into active investments that build long-term wealth.