HELOC vs. Cash-Out Refinance

Cost-and-Risk Comparison Worksheet

For general education only — not a loan offer, application, approval, rate quote, or financial advice.

Use this worksheet to organize questions and compare two ways of borrowing against home equity:

• HELOC: a revolving, open-end line of credit secured by the home. You can generally draw, repay, and draw again during a draw period. HELOCs commonly have variable rates, and payments may change. ¹
• Cash-out refinance: a new mortgage that replaces an existing mortgage and provides cash from the new loan proceeds after permitted costs and payoff amounts. The actual structure, costs, rate, term, and availability depend on the lender, property, borrower, and applicable law.

Neither option is automatically cheaper or safer. A home-secured loan can put the home at risk if payments are not made. Do not use this worksheet as a substitute for the lender’s disclosures, a housing counselor, a tax professional, or independent legal or financial advice.

1. Start with the purpose and the risk you can carry

Write in broad terms only. Do not put Social Security numbers, account numbers, passwords, full income details, tax returns, pay stubs, bank statements, or other sensitive documents in this file or send them through an unsecured message or public form.

Purpose of funds: ______________________________________________________

Estimated amount needed (optional planning estimate): $____________________

One-time need or possible future draws? ☐ One-time ☐ Future draws possible ☐ Unsure

What would happen if the payment increased or funds were unavailable?

______________________________________________________________________________

______________________________________________________________________________

Emergency reserve I want to keep separate from this borrowing decision:

______________________________________________________________________________

Before comparing offers, ask whether the purpose is essential, whether the amount can be reduced, and whether another funding source has a lower or more predictable risk. Paying other debts with home-secured borrowing can change unsecured debt into debt secured by the home; it does not erase the underlying spending or repayment risk.

2. Side-by-side offer worksheet

Complete one column for each written offer. If an item is not provided, write “not stated” and ask the lender to explain it. Compare like-for-like terms. The CFPB recommends requesting multiple Loan Estimates for comparable mortgage offers and reviewing the purpose, loan amount, payment, closing costs, rate structure, and cash to close. ²

Important: A low initial payment is not the same as a low total cost. A HELOC payment can rise when its variable rate changes, and the payment may rise substantially when the draw period ends and repayment begins. Some plans may require repayment of the balance when repayment begins. ¹

3. Cost comparison using your written disclosures

Use the lender’s figures and your own calculator. Do not rely on a marketing headline, an initial-only payment, or an estimate that omits fees.

A. Up-front cost

For each option, add the disclosed charges you would pay or finance:

• Origination or application charges: $____________________
• Underwriting, processing, or verification charges: $____________________
• Appraisal or valuation: $____________________
• Title, recording, settlement, or attorney charges: $____________________
• Points: $____________________
• Other disclosed charges: $____________________
• Less lender credits, if any: − $____________________

Estimated total up-front cost: $____________________

For a refinance, also record the existing mortgage payoff and any other debts or liens addressed in the transaction. Confirm which amounts reduce cash delivered and which amounts are added to the new balance.

B. Cash actually available for the stated purpose

New credit or new loan amount: $____________________

Less existing mortgage or lien payoff: − $____________________

Less fees and financed costs: − $____________________

Less other deductions shown by the lender: − $____________________

Estimated cash or available credit after deductions: $____________________

C. Payment stress check

Write the payment shown in each disclosure, then test a range of possible circumstances without predicting a rate or approval.

Current or proposed housing payment before this option: $____________________

Payment for the new borrowing at the disclosed starting terms: $____________________

Other recurring housing costs not included above: $____________________

Total planned monthly housing-related outflow: $____________________

For the HELOC, ask the lender to show the payment if the rate rises, if the full planned amount is drawn, and when repayment begins. Record the lender’s illustrations here:

• Scenario or rate described by lender: ____________________ Payment: $____________
• Scenario or rate described by lender: ____________________ Payment: $____________
• Repayment-period payment: $____________ Date or trigger: ____________________

For the cash-out refinance, ask for the total monthly payment, including any escrowed taxes and insurance, and compare the new term and total interest with the existing mortgage. Do not compare only the principal-and-interest line. The CFPB notes that total monthly payment can include taxes, insurance, mortgage insurance, and escrow items. ²

D. Break-even question for refinance costs

If a refinance has up-front costs, ask how many months of expected savings would be needed to recover them. A simple planning calculation is:

Estimated refinance costs: $____________________

Estimated monthly savings (if any): $____________________

Planning break-even: __________ months

This calculation is not a prediction. It does not account for changing rates, taxes, insurance, prepayment penalties, future sale or refinance, principal reduction, or the value of retaining the existing loan’s term and rate. If the new payment is higher, write “not applicable” rather than forcing a break-even result.

4. Risk and feature checklist

Ask the lender to answer each applicable item in writing.

HELOC-specific questions

• ☐ Is the rate variable? What index, margin, adjustment frequency, cap, and floor apply?
• ☐ Can the lender freeze or reduce the line? Under what stated circumstances?
• ☐ When does the draw period end, and what is the required repayment payment afterward?
• ☐ Is any payment interest-only, and when does principal repayment begin?
• ☐ Is there a minimum draw, minimum balance, annual fee, inactivity fee, or early-closure fee?
• ☐ Can the balance be converted to a fixed rate? What fee or rate applies?
• ☐ What happens if the home value changes or financial circumstances change?
• ☐ Is there a balloon payment or a requirement to repay the full balance at a particular time?

Cash-out refinance questions

• ☐ Does this replace the current mortgage? What happens to the current rate, remaining term, and payoff amount?
• ☐ What is the new loan term and total interest shown in the disclosure?
• ☐ What are the origination charges, third-party charges, points, lender credits, and cash to close?
• ☐ Is the rate fixed or adjustable? If adjustable, when and how can it change?
• ☐ Are taxes and insurance escrowed? Which costs will I pay directly?
• ☐ Is there mortgage insurance, a prepayment penalty, or a balloon payment?
• ☐ What amount of cash will actually be delivered after all payoffs and costs?
• ☐ If debt is being paid off, what safeguards will help prevent the balances from returning?

The CFPB identifies prepayment penalties and balloon payments as features that warrant careful review and questions about alternatives. ²

5. Decision notes — not a recommendation

What I value most: ☐ Payment predictability ☐ Access to future draws ☐ Lower up-front cost ☐ Shorter payoff ☐ Preserving current mortgage ☐ Other: ____________________

Largest possible downside for me: __________________________________________

What would make me stop and get independent advice? ________________________

Documents or explanations I still need: _____________________________________

Questions for a housing counselor, attorney, tax professional, or lender:

1. __________________________________________________________________________
2. __________________________________________________________________________
3. __________________________________________________________________________

My comparison date: ____________________

Do not choose an option solely because it has the lowest initial payment or because someone says approval, a particular rate, speed, savings, or outcome is guaranteed. Obtain and review the applicable official disclosures before making a decision.

6. Safe document handling

Keep this worksheet offline or in a private location. Do not upload borrower financial information to Manus, return it through an inquiry form, or send it through an unsecured email or message. Do not attach tax returns, pay stubs, bank statements, IDs, credit reports, account numbers, or login credentials to a public inquiry.

If an application is pursued, use only the approved, secure application portal provided by the responsible employer or lender, and verify the site and recipient independently before uploading anything. Ask how documents are stored, who can access them, and how to report a suspected misdirected email or wire instruction.

The FTC advises keeping mortgage and vehicle loan documents and home-improvement receipts while you own the property, protecting sensitive records, and shredding documents with personal or financial information when they are no longer needed. ³ Keep tax records according to the applicable tax authority’s guidance; ask a tax professional about your situation.

Before sharing anything, remove unnecessary information from copies where the receiving institution permits it. Never alter a document that an authorized lender requires. Store paper records in a locked location and use a reputable secure shredder or shred service for disposal.

Neutral next step

If you want to explore an option, first collect the official written disclosures and ask the same questions of more than one qualified provider. Verify the individual and company’s current authorization for the relevant state and product through the Nationwide Multistate Licensing System and Registry or the appropriate state regulator. Licensing status, product availability, underwriting, terms, rates, and fees can change and are not established by this worksheet.

Then review the documents with an approved lender and, when appropriate, an independent housing counselor, tax professional, or attorney. Submit sensitive information only through the approved employer or lender application system after confirming its authenticity. This resource does not request that you return financial details to Manus or through a public inquiry form.

Disclaimers

This educational worksheet is not legal, tax, credit, investment, or financial advice. It is not an advertisement for a particular loan, lender, product, state, rate, term, approval, closing time, savings amount, or result. No lender-specific eligibility promise is made. A mortgage professional’s public contact channel is not proof of consent, current authority, or a recommendation.

Mortgage licensing and product authority are state- and product-specific. Confirm current authorization independently before applying. Loan terms and availability are determined only through the responsible lender’s authorized process and required disclosures. A home-secured loan may result in foreclosure if required payments are not made. Consider independent advice before using home equity for debt consolidation, investment, business purposes, education, or other higher-risk uses.