Mortgage Refinance VS HELOc

Mortgage Refinance vs. HELOC: What’s the Difference?

Mortgage Refinance / Cash Out Refi

A refinance replaces your current mortgage with a new loan—typically to lower your interest rate, change your loan term, but you can also tap into your home equity with a second lien cash-out refinance.

Best for:

Lowering your monthly payment
Switching from an adjustable to a fixed rate
Paying off your loan faster
Accessing equity all at once (via cash-out)

Key Features:

New mortgage replaces your old one
Fixed monthly payments
Ideal when interest rates have dropped
Closing costs apply

Home Equity Line of Credit (HELOC)

A HELOC is a revolving line of credit that lets you borrow against your home’s equity as needed—similar to a credit card, but backed by your house.

Best for:

Renovations or home improvement projects
Ongoing or unexpected expenses
Paying for college or consolidating debt

Key Features:

You keep your existing mortgage
Borrow only what you need
Variable or Fixed interest rates
Interest-only payment options (during draw period)
Lower upfront costs (typically)

Still Not Sure Which Is Right for You?

We’ll walk you through the pros and cons of refinancing vs. a HELOC—based on your goals, lifestyle, and financial situation. We’re here to help you make the smart move.

👉 Contact South Florida Mortgage to schedule your free consultation or get pre-approved now.

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Top 3 Misconceptions

“Refinancing sets the clock back to 30 years.”

Misconception: People often believe that refinancing always restarts their loan term, even if they’ve already paid for several years.
Truth: You can refinance into a shorter term (like 15 or 20 years) or even customize your loan term based on how much time is left—potentially paying off your home faster and saving thousands in interest.

“I can't get cash out if I don't have a job.”

Misconception: Many homeowners believe they’re automatically disqualified from a cash-out refinance or HELOC if they’re unemployed or have no traditional income.
Truth: While employment helps, alternative income sources—such as retirement, rental income, spousal support, or even assets—may qualify under certain loan programs. Some options, like asset depletion loans, are designed specifically for individuals without W-2 income.

“I need perfect credit to refi or get a HELOC.”

Misconception: Some believe that if their credit score isn’t excellent, they won’t qualify.

Truth: While credit matters, many lenders offer competitive refinance and HELOC options for borrowers with good, fair, or even average credit. Other factors like equity, income, and debt-to-income ratio also play a role.
Truth: While employment helps, alternative income sources—such as retirement, rental income, spousal support, or even assets—may qualify under certain loan programs. Some options, like asset depletion loans, are designed specifically for individuals without W-2 income.