Cash-Out Refinance vs. HELOC vs. Home Equity Loan: Which Is Right for Florida Homeowners?

Central Florida homeowners have built substantial equity over the past several years, and many want to use it for a new roof, an impact window upgrade, a kitchen remodel or paying off higher-interest debt. There are three main ways to do that, and the cheapest option depends heavily on one number: the interest rate on the mortgage you already have.

The three options in plain terms

• Cash-out refinance. You replace your current mortgage with a larger one and receive the difference in cash. You end up with one loan and one payment at today's rate.
• Home equity loan. You keep your current mortgage and add a second loan for a fixed lump sum, usually at a fixed rate with a set repayment term.
• Home equity line of credit (HELOC). You keep your current mortgage and open a revolving credit line. You draw what you need during a draw period and pay interest only on what you use. Rates are usually variable.

How much you can borrow

Every option is limited by loan-to-value (LTV), or for second mortgages, combined loan-to-value (CLTV): everything you owe on the home divided by its value.

Program	Typical maximum	Ownership rules to know
Conventional cash-out refinance (Fannie Mae), one-unit primary home	80% LTV	At least one borrower on title for 6 months, and the existing first mortgage at least 12 months old
Conventional cash-out, two- to four-unit primary home	75% LTV	Same seasoning rules
FHA cash-out refinance	80% LTV	Owned and lived in the home as your primary residence for the previous 12 months, with on-time payments
VA cash-out refinance	Up to 100% under VA rules, though many lenders cap at 90%	At least 210 days after the first payment and six payments made on the current loan
Home equity loan or HELOC	Commonly 80% to 90% CLTV	Set by each lender

Example: your home is worth $450,000 and you owe $250,000. At 80% LTV, the most you could have in total mortgage debt is $360,000, which leaves room for up to $110,000 before closing costs.

The rate on your current loan changes everything

Many Florida homeowners locked rates near 3% between 2020 and early 2022. With 30-year rates around 6% in early 2026, a cash-out refinance means giving up that low rate on your entire balance, not just the new money.

Here is an illustration for a homeowner with a $250,000 balance on a loan that originally carried a 3.25% rate, who needs $60,000. The new rates below are assumptions for comparison only.

	Cash-out refinance	Keep first mortgage + home equity loan
Loans after closing	New $310,000 loan at 6.5%, 30 years	Existing loan at 3.25% plus $60,000 at 8.0%, 15 years
Monthly principal and interest	About $1,959	About $1,219 + $573 = $1,792
What happens to the low rate	Gone	Kept on the original balance

In this example, the home equity loan costs about $167 less per month and pays off the new $60,000 in 15 years instead of stretching it over 30. A HELOC would start even lower if you draw gradually, with interest-only payments during the draw period of about $400 a month on the full $60,000 at 8%, though that payment can rise with rates.

When a cash-out refinance does make sense

• Your current rate is already close to, or higher than, today's rates
• You also want to change something else, such as removing FHA mortgage insurance or converting an adjustable-rate loan to a fixed rate
• You need a large amount and want a single, fixed payment
• You are paying off high-interest debt and the total monthly savings clearly outweigh the closing costs

When a HELOC is the better tool

A HELOC fits projects where costs arrive over time, like a phased renovation, or when you want a standby source of funds. You only pay interest on what you draw. The tradeoffs are a variable rate and a payment that usually rises when the draw period ends and repayment of principal begins. Read the terms for annual fees, minimum draws and early closure fees.

Florida-specific considerations

• Hurricane hardening can pay twice. Using equity for a new roof, impact windows or roof-to-wall straps can lower your insurance premium through wind mitigation discounts that Florida law requires insurers to offer.
• Documentary stamp and intangible taxes. Florida taxes apply to new mortgage debt, so include them when comparing closing costs.
• Homestead protections. Your Florida homestead is protected from many creditors, but not from a lender holding a mortgage on it. Borrowing against the home to pay unsecured debt turns that debt into one secured by your house.

A quick decision checklist

1. Write down your current rate, balance and the exact amount you need.
2. Get quotes for all three options on the same day.
3. Compare the total monthly payment, the total interest over the time you expect to keep each loan, and the closing costs.
4. Check how interest deductibility applies with a tax professional. Under current IRS rules, interest on home equity debt is generally deductible only when the money is used to buy, build or substantially improve the home that secures it.

Frequently Asked Questions

Is a HELOC cheaper than a cash-out refinance?

It often is when your current mortgage rate is well below today's rates, because a HELOC lets you keep the low rate on your existing balance. When your current rate is similar to or above today's rates, a cash-out refinance can be the cheaper single-loan option.

How soon can I do a cash-out refinance after buying?

For a conventional cash-out refinance, Fannie Mae generally requires at least one borrower to have been on title for six months and the existing first mortgage to be at least 12 months old. FHA requires 12 months of owner occupancy. VA requires at least 210 days after the first payment due date and six payments.

How much equity do I need for a HELOC?

Many lenders allow total borrowing up to 80% to 90% of the home value, so you typically need at least 10% to 20% equity remaining after the line is opened.

Can I use home equity to pay off credit cards?

Yes, and it can lower your interest cost, but it turns unsecured debt into debt secured by your home. Make sure you can comfortably afford the payment and avoid running the card balances back up.