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Issuer can freeze, under certain circumstances, the line of credit preventing money from being withdrawn Once settlement has concluded, the loan terms cannot be changed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.