AI-generated illustrations for this guide.
A South Carolina home equity guide
Compare the cost of the new borrowing and what happens to your current mortgage. A HELOC or fixed home equity loan can add a payment beside your first mortgage. A cash-out refinance replaces that mortgage. The cheaper choice depends on your existing loan, the cash you need, fees, and how long you’ll take to repay it.
Start with the same amount of cash in your hands after fees. Then compare the full monthly payment and the interest you’d pay over the same period.
Equity is your home’s value minus what you owe on it. If you already have a mortgage, a HELOC or home equity loan is usually a second mortgage. You keep making the first loan’s payment and add the new one. The CFPB’s home equity comparison explains both options.
| Choice | How you get the money | What to compare |
|---|---|---|
| HELOC | Borrow from an approved credit line during its draw period. | Your first payment plus the HELOC payment, fees, and possible rate changes. |
| Fixed home equity loan | Receive a lump sum and repay it on a set schedule. | Your first payment plus the second loan’s payment and fees. |
| Cash-out refinance | A larger new mortgage pays off the old one and provides cash after costs. | The rate, fees, payment, and term on the whole new loan. |
A fixed home equity loan is often called a fixed second mortgage when you still have a first loan. Check that the offer has the fixed rate and payment you want. The CFPB’s home equity loan guide explains lump-sum borrowing and costs. Your home secures the debt, so keeping up with the payments matters.
With a cash-out refinance, the new rate applies to the old balance as well as the extra money. The CFPB explains why replacing a lower-rate first mortgage can raise borrowing costs. Bring your current mortgage statement when you ask for comparisons.
Ask for an itemized cost list for each choice. A small payment can still come with upfront or ongoing fees.
The CFPB’s HELOC fee guide lists charges that may apply. Get the terms for the actual loan you’re offered.
Check the annual percentage rate, or APR, along with the separate fee list. A mortgage APR includes certain loan charges. A HELOC’s APR leaves out fees, so those figures need care when you compare them. See the CFPB’s APR explanation.
If closing costs are covered by a higher rate or added to the loan, include that cost in your comparison. The CFPB explains these ways to cover closing costs.
Suppose you owe $250,000 on a fixed mortgage at 4%, with 20 years left. You want $50,000 more. For this illustration, compare keeping that loan and adding a 10-year fixed second mortgage at 8% with a new $300,000 cash-out refinance at 6.5% for 20 years.
These example rates show how the comparison works. The figures below cover principal and interest, assume every payment is made on schedule, and leave out fees, taxes, insurance, and any mortgage insurance. Both choices provide the same $50,000 before costs.
| What you pay | Keep first loan + add fixed second | Cash-out refinance |
|---|---|---|
| Monthly principal and interest, first 10 years | $2,122 combined | $2,237 |
| Monthly principal and interest, next 10 years | $1,515 after the second loan is paid off | $2,237 |
| Total interest over the next 20 years | $136,385 across both loans | $236,813 |
Want to try your own numbers? Use our mortgage calculator to estimate a fixed-rate monthly payment. Try different rates and loan terms to see how the payment changes. If you’re adding a second mortgage, include your current mortgage payment in your budget too.
The fixed second has a higher rate than the cash-out loan in this illustration. Keeping the 4% rate on the existing $250,000 balance changes the overall cost. With different rates, fees, or payoff plans, the comparison can change.
Ask for numbers based on how long you expect to keep the debt. If you may sell in five years, compare the interest and fees you’d pay by then, along with the balance you’d still owe. The CFPB’s guide to comparing loan offers shows how to review payment and borrowing costs.
A HELOC lets you draw money as needed under the plan’s terms. That can help with costs spread over time. Ask about any minimum draw or opening balance before you assume you can leave the line unused.
HELOCs usually have variable rates. Ask how the rate is set, when it can change, and what your payment could be at a higher rate. Also ask for the payment once the draw period ends. The CFPB’s HELOC guide covers those changes.
Some plans allow interest-only payments during the draw period. Those payments leave the amount borrowed unpaid. To compare costs with a fixed loan, choose how quickly you want to pay down the HELOC and ask the lender to estimate that payment. The CFPB’s HELOC booklet includes a comparison worksheet for payment terms and fees.
Bring your mortgage statement, the cash you need, when you’ll need it, and your planned payoff date. Ask the lender to show the combined payment if you keep the first mortgage and add another loan.
If a refinance starts a longer repayment term, ask what that does to total interest. Compare a payment you can manage now with a plan for paying off the debt. Keep property taxes, insurance, upkeep, and other household bills in that budget.
A HELOC uses different disclosures. For most fixed home equity loans and cash-out refinances, you receive a Loan Estimate. For a HELOC, ask for the written plan terms and fees so you can compare the same costs. The CFPB explains which loans use a Loan Estimate.
Check the agreement for early-closure charges, prepayment terms, and any costs you must repay if you close the line soon. Ask for a payoff figure before deciding to refinance or sell. The fee list above can help you ask about those charges.
A deduction depends on how you use the money and whether you meet the tax rules. Have a tax professional review your plans before you count a deduction in your budget. See the IRS home mortgage interest guidance.
HELOCs and second mortgages
Compare replacing your mortgage
HELOCs and second mortgages
HELOCs and second mortgages
HELOCs and second mortgages
HELOCs and second mortgages
Compare refinance options
Compare refinance options
Your next step
Share your current mortgage, the amount you need, and when you plan to pay it back. We’ll help you compare the loan choices, payments, fees, and cash you would receive using terms available for your home and plans.
Start with a monthly payment estimate in our mortgage calculator, then let our team help you compare the full costs. For a HELOC, ask us to show how the payment could change as its rate and repayment terms change.
General education. Loan terms and eligibility depend on a full review. Beaufort Lending, NMLS #1703543. Equal Housing Opportunity.
