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Real estate investors looking to scale quickly often find themselves weighing two powerful financing tools: the cash-out refinance (refi) and the home equity line of credit (HELOC). Both options allow you to tap into the equity you’ve built in a property, but they work differently and are suited to different investment strategies. Understanding the key differences can help you choose the right approach for maximizing your portfolio growth.
A cash-out refinance replaces your existing mortgage with a new, larger loan, allowing you to take out the difference in cash. This can be an attractive option for investors looking to unlock significant capital for property acquisitions, renovations, or scaling a portfolio. It essentially “resets” your mortgage while providing immediate liquidity.
For a comprehensive guide on cash-out refinancing, check out Refinancing with DSCR Loans: Unlocking Equity in Your Investment Properties.
A HELOC is a revolving line of credit secured by the equity in your property. Unlike a cash-out refi, which provides a lump sum, a HELOC functions more like a credit card, allowing you to withdraw funds as needed up to a set limit. This makes it ideal for ongoing projects or flexible funding needs.
For a deep dive into how HELOCs can be a game-changer for investors, explore Complete Guide to Investor HELOCs.
Choosing between a cash-out refi and a HELOC depends on your goals, risk tolerance, and cash flow needs. Here are some key factors to consider:
Both cash-out refis and HELOCs are powerful tools for real estate investors, but the right choice depends on your unique strategy:
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Yes, HELOCs can be used for down payments, renovations, or even full property purchases, depending on the equity available. Learn more here.
For BRRRR investors looking to recycle equity, cash-out refis can offer larger sums for scaling faster.
Both options carry risk, but a cash-out refi locks in a fixed payment, while a HELOC’s variable rates could increase as values fall.
This article is for educational purposes only and does not constitute financial, legal, or investment advice. Mortgage rates, terms, and requirements vary by lender and individual circumstances. Always consult with qualified, licensed mortgage professionals before making financial decisions. REInvestorGuide.com may receive compensation from featured lenders and service providers.
Our advise is based on experience in the mortgage industry and we are dedicated to helping you achieve your goal of owning a home. We may receive compensation from partner banks when you view mortgage rates listed on our website.