HELOCs
Below is a side-by-side comparison chart to help understand the differences between a typical HELOC and a cash-out refinance:
| HELOC | Cash-out Refinance |
|---|---|
| Some take 60+ days to complete | Some take 20 days or less to complete |
| Adjustable rate tied to the Prime Rate | Fixed rate |
| Some have a Balloon Payment – balance outstanding is due in full in 5, 7, or 10 years
Some require principal & interest payments amortized over a term after initial draw period |
No Balloon Payment – balance is paid down via consistent monthly payments spread across the loan term |
| Some have monthly payments that are interest only payments
Some have monthly payments that include principal & interest |
Principal & Interest payments (principal balance does decrease) |
| Can withdraw money and pay down balance, typically as needed. Some limit the number of years allowed to withdraw money | One time withdrawal to get money as cash-back at settlement |
| Issuer can freeze, under certain circumstances, the line of credit preventing money from being withdrawn | Once settlement has concluded, the loan terms cannot be changed |
*If a HELOC has an outstanding balance and a refinance is used to payoff a first mortgage and
a HELOC, with specific loan programs the interest rate will be higher because the HELOC was
not opened at the same time as the first mortgage.
