The Quick Read: A cash-out refinance usually carries higher closing costs, and a home equity loan usually carries lower ones. The reason is structure. A cash-out refinance replaces your whole first mortgage, so the fee base is the entire new loan. A home equity loan is a second mortgage on top of the one you keep, so its fees attach to a smaller amount. Lower fees do not make a home equity loan the winner every time, though. Your current first mortgage terms, the cash you need, and how long you will stay in the home decide it.
The only way to know is to compare the fee sections of two Loan Estimates side by side.
Cash-out refinance estimate
The starting figures are an example value with a balance and a cash request in proportion. Replace them with yours.
Editable benchmark: 7.18% as of November 5, 2026 · Freddie Mac 30-year average via FRED®. A conventional market reference, not a cash-out refinance quote.
Illustrative starting assumptions: a $350,000 home value, a $193,000 current balance, the agency cap on a one-unit principal residence, a thirty-year term at the current Freddie Mac benchmark, and property taxes and insurance estimated at typical national rates. Every field is editable.
Illustrative estimate only — not a Loan Estimate, approval, quote, or commitment to lend. The rate field carries the weekly Freddie Mac thirty-year conventional benchmark, a market reference and not a cash-out refinance quote; a cash-out loan is priced by the lender at lock. The cash available is the loan the program cap allows less the balances paid off, before closing costs, which are not included. The HELOC line is the program’s combined loan-to-value ceiling applied to the same value and balance. Taxes and insurance are editable estimates. Licensed in sixteen states for consumer mortgages.
Side-by-Side
The table below covers the structural differences. Figures for cash-out refinance are the conventional guidelines Lendmire sees across the wholesale programs it places files with, subject to lender guidelines and full file review.
| Factor | Cash-Out Refinance | Home Equity Loan |
|---|---|---|
| Lien position | New first mortgage | Second mortgage |
| Existing first mortgage | Paid off and replaced | Stays in place |
| Number of payments | One | Two |
| Fee base | The whole new loan | The new second-lien amount |
| Leverage (conventional) | 80% LTV, one-unit primary residence | Set by each lender |
| Credit floor (wholesale conventional) | Starts at a 620 decision score | Set by each lender |
| Mortgage insurance | Above 80% LTV, with one wholesale exception | Not part of the structure |
| Occupancy | Primary, second home or investment property | Set by each lender |
| Documentation | Full file review and appraisal | Varies; some lenders waive some costs |
| Seasoning | First mortgage at least 12 months old; 6 months on title | Set by each lender |
Two notes on the table. Cash-out leverage drops to 75% on two- to four-unit primary residences, second homes and investment property, so occupancy sets the ceiling. And a home equity loan has no standard national rulebook like the agency guides, so its limits come from the lender you pick.
Why the Fee Base Matters More Than the Cash You Take
On a cash-out refinance, you are not charged only on the cash you pull out. You are writing a brand-new first mortgage, and its costs follow the full balance. Third-party items like the appraisal and title work come with it too.
The Consumer Financial Protection Bureau’s HELOC brochure puts it plainly in its comparison table: a cash-out refinance gives you one mortgage payment, but its closing costs are “generally higher” and the process may take longer. That brochure also lists the fees that can show up on home equity borrowing: an appraisal fee, an application fee that may not be refunded if you are turned down, and closing costs such as attorney, title search, preparation and filing, insurance and tax charges.
A home equity loan is not free, though. The CFPB says home equity loans may carry upfront fees and costs, and tells borrowers to compare more than the monthly payment. Some lenders waive some or all of the up-front costs. Others charge them. You will not know which until you ask.
The Fee Lines You Will Actually See
Both products draw from the same menu of charges. What differs is which ones apply and how large the base is.
- Appraisal. Both usually need a valuation of the home. An FHA cash-out always requires a full appraisal.
- Origination or application charges. These cover the work of taking the loan. On a refinance, they follow the bigger loan.
- Title and recording. A new first lien needs fresh title work. A second lien needs its own recording.
- Attorney or settlement fees. These depend on your state and your lender.
- Mortgage insurance or funding fees. These apply to the refinance side, not to a typical second lien. On the conventional path, mortgage insurance applies above 80% LTV. The one exception is a wholesale lane that reaches just under 90% LTV with no mortgage insurance at a 680 score and a 50% ratio on a thirty-year fixed primary residence with a conforming balance, and that lane carries its own six months of seasoning under lender guidelines.
- Agency credit adjustments. Freddie Mac’s cash-out refinance product page confirms a cash-out credit fee applies in the price. That is a lender-side layer a second lien does not have.
Which lines are negotiable? Third-party charges such as title and appraisal are often shoppable. Lender charges can sometimes be reduced or waived, but not always. Ask for the lines in writing and compare them.
When a Cash-Out Refinance Is the Better Fit
Choose the refinance route when one or more of these describe you:
You need a large sum. Second-lien lenders set their own limits. A first-lien cash-out refinance can reach more equity than many second liens, though the ceiling varies by program, property type, and occupancy, and DSCR cash-out programs cap leverage lower than conventional owner-occupied loans do. Final terms depend on lender guidelines, property type, leverage, and the borrower’s complete credit picture.
Your first mortgage is not worth keeping. If you are replacing the loan anyway, you pay one set of closing costs instead of two. One payment also replaces two.
You want to change the terms of the whole loan. A cash-out refinance replaces your current loan with a new one under different terms. That is the point of it, and it can be either good or bad depending on what you give up.
You are staying long enough. Higher up-front costs get spread over more years. The longer you hold the loan, the more that spreading helps.
You hold a second home or a multi-unit property. A cash-out can be written on a primary residence, a second home or an investment property, and occupancy sets the leverage. Lendmire’s cash-out refinance programs page covers the lanes available.
The first mortgage being paid off must be at least 12 months old, counted note date to note date, and a borrower must have been on title for six months. Delayed financing, inheritance and legal-award exceptions exist. Freddie Mac’s title requirement works the same way, with named exceptions. If you bought recently, check this first.
Cash from a cash-out has no use restriction. You can pay off debt, fund a project or build a reserve. That freedom comes with a cost: the loan is secured by your home.
When a Home Equity Loan Is the Better Fit
A home equity loan wins in a narrower set of cases, and those cases are real.
You have a first mortgage you want to keep. This is the biggest one. Replacing a good first mortgage to reach a modest amount of cash can cost more than it returns. A second lien leaves the first loan alone.
You need a modest, defined amount. The CFPB describes a home equity loan as a lump sum, usually at a fixed rate. If you know the number, and it is not huge, the smaller fee base is attractive.
You plan to move or pay it off soon. If you will not hold the loan long, you do not have time to spread out the heavy up-front costs of a new first lien.
You are fine with two payments. You will carry the original mortgage payment plus the new one. Make sure the budget handles both.
You can find a lender who waives costs. Some do, so ask, but read the fine print on what you give up for a “no-closing-cost” offer. The costs are built into the rate or the balance, so you pay in another way.
The Part People Skip: Financed vs. Paid at Closing
Fees do not disappear when you roll them into the loan. They either come out of your cash proceeds or raise the balance. Either way, they cost you.
Say you take a cash-out refinance and finance the closing costs. Your net cash is lower than the headline number, or your balance is higher, or both. That feeds your break-even.
Here is a simple way to build your own comparison without a tool:
1. Total the up-front costs on each Loan Estimate.
2. Subtract those costs from the cash you would receive. That is your net cash.
3. Note what happens to your first mortgage terms under each path.
4. Estimate how many years you will hold the loan.
5. Ask whether the extra up-front cost on the refinance is justified by what you gain, over that holding period.
The cheaper option on day one is not always the cheaper option over ten years. Reverse that, too: the option with higher fees can win when it fixes something bigger.
What Happens to Your Current Mortgage
This is where many comparisons go wrong. A cash-out refinance does not add to your first loan. It retires it. If your existing loan has terms you like, you give them up. If its terms are weak, replacing them is a benefit of the refinance.
A home equity loan leaves the first mortgage alone. You keep its terms and its remaining balance, and you add a second obligation.
Edge cases deserve a quick look. If you refinance and add new subordinate financing at the same time, Fannie Mae can still treat it as limited cash-out when the first mortgage meets the eligibility rules. Paying off an existing second lien during a refinance can make the deal a cash-out, depending on what that second lien funded. And in Texas, cash-out on a homestead (a Section 50(a)(6) loan) is capped at 80% of the home’s value by the state constitution. The wholesale no-MI lane is not written there.
If you hold a VA-backed loan, a VA cash-out refinance replaces your current loan, and VA notes you may pay a funding fee at closing unless you are exempt. Check VA’s own rate chart for exact percentages. An FHA cash-out is a full-underwriting refinance with an appraisal, and FHA mortgage insurance applies both upfront and annually. FHA Streamline and the VA IRRRL are rate-reduction products for existing government loans. They do not let you take cash out.
Key Terms Defined
Cash-out refinance: A new first mortgage that pays off your old one and gives you the difference in cash.
Home equity loan: A second mortgage that gives you a lump sum while your first mortgage stays in place.
Closing costs: The fees paid to complete a loan, such as appraisal, title, recording and lender charges.
LTV (loan-to-value): Your loan balance divided by your home’s value, shown as a percentage.
Seasoning: The waiting period a lender requires, such as how long you have been on title.
Loan Estimate: The standard form that lets you compare fees across lenders.
Lien: A legal claim on your home that secures the loan.
Reading the Loan Estimate
Ask each lender for a Loan Estimate on the same day for the same amount. The CFPB’s Loan Estimate page describes it as the standard way to compare. Look at the fee sections, not just the monthly figure. Check whether fees come out of proceeds or are financed. Then get several estimates and compare points, early termination fees and closing costs.
The Verdict
If you want to keep a first mortgage you like and need a set amount, a home equity loan is often the cleaner, lower-fee tool. If you want one payment, need more equity than a second lien offers, or your first mortgage needs replacing anyway, a cash-out refinance is usually the stronger fit despite higher costs. Both put your home on the line.
If you are weighing a cash-out refinance against keeping the loan you have, Lendmire can help you compare the programs and the equity each one reaches. All figures are subject to lender guidelines and full file review, and nothing here is a commitment to lend.
Frequently Asked Questions
Is a home equity loan always cheaper than a cash-out refinance?
No. Its fee base is usually smaller, so up-front costs are often lower. But the CFPB says home equity loans may carry fees too, and some lenders charge them. Leaving your first mortgage in place also means two payments. Compare Loan Estimates before deciding.
Do cash-out refinance fees apply to the whole loan or only the cash I take?
They follow the whole new loan. A cash-out refinance replaces your first mortgage, so its costs attach to the full new balance. A second lien’s fees attach to the smaller amount. That is the main reason refinance costs run higher.
Can I roll closing costs into the loan?
Often, yes, subject to lender guidelines and your leverage limit. The costs then raise your balance or reduce your net cash. They are not gone. Count them when you compare.
Does a “no-closing-cost” loan really cost nothing?
No. Treat the term as marketing and compare the full terms on the Loan Estimate.
Does mortgage insurance apply to a cash-out refinance?
On the conventional path, mortgage insurance generally applies once the loan-to-value ratio moves past the conventional threshold, with one exception: a wholesale lane that allows no mortgage insurance at somewhat higher leverage. It requires a qualifying credit score and debt ratio on a thirty-year fixed primary residence with a conforming balance. A home equity loan does not carry it in the same way. These specifics are subject to lender guidelines and a full review of property, leverage, and credit.
For your own numbers, request a scenario review with Lendmire.
For current guidelines and terms, see Lendmire’s refinance programs page.
About Lendmire
Lendmire is a mortgage brokerage (NMLS# 2371349) licensed for consumer mortgage lending in 16 states, arranging FHA, VA, conventional and jumbo purchase and refinance loans through a wholesale lending network. Eligibility is determined by the lender on each file. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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Informational only. Not a Loan Estimate, approval, or commitment to lend. Program availability and eligibility are subject to lender guidelines, credit approval, property review, and underwriting.
References
2. CFPB: What Is a Home Equity Loan
3. Freddie Mac – Cash-out refinance
5. Fannie Mae Selling Guide B2-1.3-02
6. VA – Cash-out refinance loan
This article is part of Lendmire’s cash-out refinance program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: How to Use Cash-Out Refinance Proceeds as Reserves on the Same Loan · How to Qualify and Apply for a Cash-Out Refinance and Keep Closing Costs Down · How to Get From Application to Closing on a First Cash-Out Refinance
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
- North Carolina Real Estate Broker · License# 343312 · Verify on NCREC
- North Carolina Insurance Producer · License# 19053198 · Property, Casualty, Life, Health · Verify on NAIC SBS
- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
Legal disclosures. Lendmire (NMLS# 2371349) is a state-licensed mortgage brokerage that arranges financing through wholesale lender relationships. Lendmire is not a direct lender, depository institution, or registered financial advisor. The discussion above is general informational content about real estate financing — it is not financial, legal, or tax advice, and readers should consult licensed professionals for guidance on their individual circumstances. Loan inquiries are subject to lender underwriting; this article does not represent a commitment to lend. Loan terms, rates, and qualification standards vary by borrower, property, and state, and are subject to change at any time. Equal Housing Opportunity. NMLS Consumer Access: nmlsconsumeraccess.org.