Compare four common ways homeowners access equity.
No single structure is best for every homeowner. This guide compares how common options differ so you can identify the questions that matter before choosing a path.
Start with structure, not marketing language.
The labels used by providers can differ. The comparison below focuses on the underlying mechanics: whether the option is debt or a contract, whether it changes the first mortgage, whether it creates scheduled payments, how rates or future value affect cost, and how the obligation ends.
| Question | HEI / home equity agreement | HELOC | Home equity loan | Cash-out refinance |
|---|---|---|---|---|
| Basic structure | A contract that provides cash today in exchange for a future settlement calculated under the agreement. It is generally not structured as a traditional monthly-payment loan. | A revolving line of credit secured by the home. Borrowing is typically available during a draw period, followed by repayment under the account terms. | A closed-end loan secured by the home, usually funded as a lump sum and repaid through scheduled payments. | A new first mortgage larger than the balance being refinanced; the difference, less costs and payoffs, is received as cash. |
| Effect on existing first mortgage | Usually does not replace the existing first mortgage, although the agreement may place a lien or other recorded interest on the property. | Usually leaves the first mortgage in place and adds a subordinate lien. | Usually leaves the first mortgage in place and adds a subordinate lien. | Replaces the existing mortgage with a new mortgage. |
| Scheduled monthly payment | Often no traditional monthly payment to the HEI provider, but the homeowner has a future settlement obligation. Contract terms vary. | Payments are generally required and can change, especially when rates are variable or the account moves from draw to repayment. | Scheduled principal-and-interest payments are generally required. | Scheduled mortgage payments are required under the new loan. |
| Rate or value exposure | Cost may depend on the home’s future value, provider participation formula, starting-value adjustments, caps, fees, and settlement timing. | Often variable-rate exposure, though product structures differ. Interest cost depends on balances, rates, and time outstanding. | Often a fixed rate, though terms vary by lender. Total borrowing cost depends on rate, fees, amount, and term. | The new mortgage rate and closing costs matter because the entire refinanced balance is subject to the new loan terms. |
| How the obligation ends | Usually through a contractual settlement after a trigger such as sale, refinance, homeowner-initiated payoff, or maturity, depending on the agreement. | Through repayment of the outstanding balance and closure of the line, subject to the account terms. | Through repayment or payoff of the loan. | Through normal mortgage repayment, sale, or a future refinance/payoff. |
| Main question to ask | How is settlement calculated in several future-value scenarios, including limited appreciation, strong appreciation, and a decline? | What happens to the rate and required payment during both the draw and repayment periods? | What is the APR, total monthly payment, term, and total cost after fees? | Does replacing the current mortgage improve the overall plan after considering the new rate, costs, and full loan balance? |
Write down your priorities before comparing offers.
These questions do not produce a recommendation or score. They help you identify which tradeoffs deserve the most attention when you read actual loan estimates, disclosures, or home equity agreements.
A checked box does not mean an option is appropriate or available. Use the worksheet to organize questions, then evaluate actual provider terms and obtain independent financial, legal, or tax advice when appropriate.
Three comparisons people often miss
- Cash-flow impact versus total economic cost. A structure can reduce monthly obligations while still creating a meaningful future payoff or settlement.
- First-mortgage preservation versus total borrowing cost. Keeping an attractive existing mortgage can matter, but a second lien or equity contract has its own costs and restrictions.
- Today’s cash amount versus exit flexibility. Consider how easily you could sell, refinance, repay, or settle if your plans change.
If you want to discuss your situation
The guide above is general education. If you want BP Housing to review the information you choose to provide about your property and goals, the inquiry form is available separately.
Go to the Home Equity Review form →