HELOC vs. Cash Out Refinance

May 20
Category | General

The value of most homes has been on the rise. If you’re in need of cash to replace the roof, update the kitchen, pay for education, or help finance a new place for the kid who’s back from college and living rent-free in the basement, your home's rising value may provide the leverage you need to make it happen!

When homeowners inquire about accessing cash from their homes, they’re often thinking about getting a Home Equity Line of Credit (HELOC). However, there’s another way homeowners can get cash from their home and that’s by choosing a cash-out to refinance instead.

In the current environment, many people want to keep the great interest rate they already have on their home loan, so they automatically choose a HELOC over a refinance. But wait—there’s a big difference that can make the benefits hard to compare at a glance. We’ll explain.

Is it better to use a Home Equity Line of Credit or to do a "Cash-Out" Refinance despite a higher interest rate?

When we suggest they look into refinancing instead, even if it’s at a higher rate than they pay on their current mortgage, they stop listening and consider us crazy! But hear us out…

Believe it or not, there are times when a higher fixed rate can be a great idea and a far safer choice. The simple reason is that rates on HELOCS are usually adjustable and based on the prime rate as influenced by the federal reserve board. Rates have been low for years, but they typically move in cycles. In the past, they’ve been anything but low peaking at more than 20%.

HELOC vs. Cash-Out Calculator

Not everyone loves math, but a little of it can be your friend when you want to use your money wisely. Besides, we’re doing the hard work for you! Using this calculator, you’ll be able to see how taking cash out with a fixed rate loan compares with using an adjustable rate HELOC.

Simply plug in the numbers for the amount of cash you might like for both a HELOC and again as an amount over your current loan balance, set the rates, and there you go – an instant payment comparison.

Don’t just look at the comparison today. The real benefit of a fixed rate is not always obvious in the beginning. To see what happens if rates rise further tomorrow, move the slider on the HELOC loan and watch how high that payment can climb.

HELOC loans have their place and so does the peace of mind that can come from a fixed rate loan with a principal and interest payment that will never change.

Go ahead, give it a try!

  • Stocks continued to sell off in anticipation of an economic slowdown expected with future Fed actions, helping mortgage rates this week.
  • Retail spending increased 0.9% in April, despite inflation. This 4th straight monthly increase signals the economy is still strong.
  • Unemployment claims rose last week to 218K, the highest since January. However, continuing claims fell to the lowest level since 1969.

  • Existing home sales dropped in April to the lowest level since the start of the pandemic due to the ongoing lack of inventory.
  • Homebuilder sentiment dipped to a 2-year low in May, as declining demand and rising costs raised concerns. It is expected to bounce back.
  • Last week’s purchase mortgage applications fell 12% week to week and 15% year over year.



  • Inflation expectations for the next year fell to a median 6.3% in April, a 0.3% decrease from the record high the previous month.
  • However, producer prices rose 11% in April, signaling continuing elevated consumer inflation in the near future.
  • Last week's jobs data showed slightly more jobs than expected added in April in an increasingly tight labor market and despite surging inflation.

  • Purchase mortgage applications rose 5% over the previous week. Although apps were down 8% from a year ago, that number is shrinking.
  • Apps for adjustable rate mortgages, which often have a lower starting rate than 30 yr fixed, surged to a 14-yr high, comprising 11% of apps.
  • Lumber prices are falling, down 30% and reaching their lowest level for the year. Prices are still above historical levels but could continue to drop.





If you’re a first-time home buyer looking to purchase a home, then you’re familiar with the high ticked price tags these homes come with. They have certainly skyrocketed. It’s common to feel discouraged and to feel as if homeownership is out of reach these days, but we’ve got good news. Luckily, there’s a wealth of homeownership programs in New Jersey that help home buyers secure a mortgage, make a down payment, cover closing costs, and more.

The state of New Jersey now offers a conventional version of their down payment assistance program for first-time buyers. Now, qualified clients can receive $10,000 to be used towards the down payment and closing with affordable mortgage insurance premiums that follows conventional mortgage guidelines. 

Here’s Some Information About the New Jersey Conventional DPA Program:

  • 30-year, Fixed-Rate Conventional Loan 

  • Affordable Mortgage Insurance Premiums

  • $10,000 for Down Payment and Closing Costs

Do You Qualify for the New Jersey Conventional Down Payment Assistance Program?

It may seem that this program is solely for first-time homebuyers, but the restrictions are somewhat flexible. First-time home buyers are borrowers that have not had an ownership interest in their primary residence during the previous three years. In addition, borrowers need to fall under certain income limits and meet a minimum credit score requirement of 620.

  • DPA is a $10,000 forgivable loan with no interest and no monthly payments. Forgiven after 5 years as a primary residence (While grant funds are available).
  •  Single-Family Properties and Condos, Owner Occupied, Primary Residence in NJ.
  • Income limits are determined by the county of the purchase property but must not exceed 80% of the Area Median Income. Please reference the Freddie Mac HFA Income Limits for additional details.
  • Eligibility requirements, exclusions, and other terms and conditions apply. 

Bottom Line

Greenway Mortgage is proud to offer this program to first-time homebuyers in New Jersey. We are here to help make homeownership a reality for you. Reach out today to learn more or to see if you qualify for the NJ Conventional Down Payment Assistance Program.


  • The Fed raised policy rates 0.5% this week. The move will increase short term rates like car loans, some home equity loans, and credit card rates.
  • The Fed rate increase does not directly increase mortgage rates though. Mortgage rates moved higher already in anticipation of Fed action.
  • Concerns that intense labor demand could spark further wage increases has investors worried the Fed won't be able to curb inflation.

  • A recent Gallup survey showed just 30% of adults think now is a good time to buy a home, the first time it has been below 50% since 1978.
  • Total mortgage applications were up 2.5% last week. Though purchase applications were down 11% from last year, they were up 4% on the week.
  • 71% of homeowners with upcoming house projects expect to proceed despite anticipated higher costs, delays and materials shortages.

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