How Does a Cash-Out Refinance, Home Equity Loan, or HELOC Change My Monthly Payment?
It can go up or down, depending on the product. A cash-out refinance replaces your mortgage with one new payment on a bigger balance, at the new loan's rate and term. A home equity loan or HELOC leaves your first mortgage as it is and adds a second payment beside it. A home equity loan's payment is usually fixed. A HELOC's follows your balance and rate, and usually rises once repayment begins.
Last updated November 2, 2026How does a cash-out refinance change the payment?
You end up with one replacement mortgage payment, rather than adding a second loan payment. Like any mortgage payment, it depends on the loan amount, the term and the rate. The new balance is your old one plus the cash you take out, plus any closing costs you roll in. A longer term spreads that balance out and lowers the payment, though you pay interest for more years. The rate applies to the whole balance, not just the new cash, so when today's rate is above the one you have now, the payment usually goes up. The CFPB has pointed out that when rates are higher, cash-out borrowers often take on both a larger payment and a longer term.
How does a home equity loan change the payment?
Your first mortgage keeps its rate and terms. The home equity loan is a second mortgage with its own payment, which you make in addition to the first. It can carry a fixed rate or an adjustable one. On a fixed-rate home equity loan the payment is set for the term, so it starts right away and stays the same; on an adjustable one the rate can move with its index. Either way your total housing payment goes up by that amount. The upside is that your current mortgage rate stays in place, which helps most when it's lower than what you'd get today.
How does a HELOC change the payment?
It's also a second mortgage on top of the first, but its payment moves. During the draw period, many HELOCs set the minimum payment from what you currently owe, so you pay only on what you've drawn, and on some lines that payment covers only interest. HELOCs usually have variable rates, so the payment can change from month to month. When the draw period ends, you stop borrowing and start paying back principal too, and the CFPB notes payments are often significantly higher at that point. Some HELOCs require the whole balance once repayment begins.
Do taxes and insurance change?
Not because of the new loan. Your property taxes and homeowners insurance cost the same either way. With a cash-out refinance, the new loan's escrow account usually takes them over. With a home equity loan or HELOC, they stay with your first mortgage's escrow, or with you if you pay them yourself. What a monthly payment estimate includes covers the rest of the full payment.
It depends on your situation:
- Your current mortgage rate is lower than today's: a home equity loan or HELOC keeps it, and only the new money carries a new rate.
- You'd like one payment: a cash-out refinance puts everything in a single loan.
- You want the principal and interest to stay the same: a fixed-rate home equity loan or a fixed-rate cash-out refinance does that. It does not freeze the whole payment: taxes, homeowners insurance and anything else in escrow can change over time, and an adjustable-rate home equity loan can move with its index.
- You'd rather pay only for what you use: a HELOC's draw-period payment follows your balance. Plan ahead for the higher payment when repayment starts.
- You're paying off credit cards or other debts: compare everything you pay each month before and after, not just the mortgage. Your housing payment can rise while your total monthly payments fall.
| Cash-out refinance | One new payment replaces your current one, based on the bigger balance and the new loan's rate and term. |
|---|---|
| Home equity loan | The new loan does not change your first mortgage payment; a second payment, usually fixed, is added. |
| HELOC, draw period | The new line does not change your first mortgage payment. The HELOC payment follows your balance and rate, and on some lines covers only interest. |
| HELOC, repayment period | Principal is added, so the payment is often much higher, and some lines call for the full balance. |
| Taxes and insurance | They don't change because of the new loan. They stay in escrow or with you. |
Related questions
- What Does a Monthly Payment Estimate Include
- What Is the Difference Between a HELOC, a Home Equity Loan, and a Cash-Out Refinance
- How Does a HELOC's Variable Rate Move With Prime and the Fed
- How Do HELOC Draws, Draw Periods, and Repayment Actually Work
- If I Consolidate Debt Into My Mortgage or a Home Equity Loan, Will It Really Save Money
- When Does a Refinance, HELOC, or Cash-Out Loan Not Make Sense
Sources
- https://www.consumerfinance.gov/ask-cfpb/what-is-a-home-equity-line-of-credit-heloc-en-107/
- https://www.consumerfinance.gov/ask-cfpb/what-is-a-home-equity-loan-en-106/
- https://www.consumerfinance.gov/ask-cfpb/what-is-the-difference-between-a-home-equity-loan-and-a-home-equity-line-of-credit-heloc-en-247/
- https://www.consumerfinance.gov/ask-cfpb/what-is-a-second-mortgage-loan-or-junior-lien-en-105/
- https://www.consumerfinance.gov/ask-cfpb/how-do-mortgage-lenders-calculate-monthly-payments-en-1965/
- https://www.consumerfinance.gov/archive/blog/office-of-research-blog-a-look-at-cash-out-refinance-mortgages-and-their-borrowers-between-2013-to-2023/
Sourced from licensed loan officers and brokers in the FreeRateUpdate network.
Educational information only, not individualized financial or legal advice. Program details and rates change; verify current terms with a licensed loan officer before making a decision.