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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.
Feature | HELOC | Cash-Out Refinance |
Loan Type | Revolving line of credit | New mortgage loan |
Structure | Second mortgage | Replaces existing mortgage |
Access to Funds | Withdraw as needed | Lump sum at closing |
Interest Rate | Variable (usually) | Fixed or variable |
Repayment Type | Interest-only (draw period) | Principal + interest from day one |
Closing Costs | Lower | Higher |
Best Use Cases | Flexible access, BRRRR rehabs | Large equity unlock, rate refinance |
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:
📌 You only pay interest on what you borrow, and you can reuse the line after repayment.
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:
📌 Interest is paid on the full amount borrowed from day one—no flexibility like a HELOC.
Submit Your Loan ScenarioIt depends on your investing style, equity position, and short-term vs. long-term goals.
Investor A: House Hacker in Florida
Investor B: BRRRR Investor in Ohio
You can use a cash-out refi on one property and set up a HELOC on another. This lets you:
Both HELOCs and cash-out refinances are powerful tools for unlocking equity and scaling your real estate portfolio. The right choice depends on:
Choose strategically, and you can turn idle equity into active investments that build long-term wealth.
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.