Which way to use your home equity costs less?
Compare the monthly payment, total cost, and what happens at the end.
See the numbers behind the tradeoff
The CFPB compared a $50,000 HEI with a $50,000 HELOC at 9%. In its strongest-growth case, the HEI repayment was more than twice the HELOC cost. Source: CFPB.
Choose by payment and risk
Your home secures every option. Rate, fees, and the end payment decide the cost.
HELOC
Borrow as needed and pay interest on what you use. The rate can rise.
Home equity loan
Take one lump sum at a fixed rate. Payments stay predictable.
Cash-out refinance
Replace your mortgage with a larger one. A higher new rate can erase the benefit.
Home equity investment
Get cash with no monthly payment. Give up part of your home’s future value.
Reverse mortgage
For homeowners 62+. There is no monthly payment, but fees and the balance grow.
Compare payment, cost, and risk
| Option | Monthly payment | Rate / cost | The catch |
|---|---|---|---|
| HELOC | Yes | Variable interest | Rate can rise Compare first |
| Home equity loan | Yes | Fixed | Less flexible |
| Cash-out refinance | Yes (new mortgage) | Resets rate | Rarely helps if rates rose |
| Home equity investment | None | Share of upside | Balloon; can cost the most |
An HEI feels free because there's no monthly bill. But you're selling a slice of your home's future gains. Run the case where your home doubles: the no-interest deal can cost more than a mortgage at three times the rate.
The full settlement also comes due at the end of the term. If you can't pay it from savings or a refinance, it can force a sale.
✓ An HEI is worth modeling if
- You're equity-rich but income-short.
- You can't clear the income hurdle for a HELOC.
- You've modeled the buyout in a rising market and can live with the number.
✕ Skip it if
- You have any cheaper way to reach the cash.
- You could carry a HELOC or home-equity-loan payment.
- You'd struggle to settle the balloon at the end.