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Cash-Out Refi vs Home Equity Investment Calculator
With low-rate legacy mortgages and high current rates, cash-out refinancing destroys value. HEI products offer access to equity without touching the first mortgage. This calculator compares total cost across both structures.
Cheaper structure
Cash-out refi
Cash-out additional monthly
$958
Cash-out total over hold
$114,977
incremental pmts × months
HEI payback at exit
$155,638
How the math works
Cash-out refinance: proceeds but the whole mortgage gets a new (higher) rate. HEI: proceeds with no monthly, but investor takes a share of appreciation at exit. Cash-out often makes sense only when current mortgage rate is close to current market — otherwise the full balance resets to a much higher rate.
Specific to current rate environment: if you have a 3-4% existing mortgage and current rates are 7%+, cash-out is usually awful. HEI or HELOC preserves the legacy rate and pulls only the equity you need.
How to Use
- Enter home value, existing balance, and existing rate.
- Enter cash needed.
- Enter cash-out refinance rate.
- Enter HEI appreciation share and assumed appreciation rate.
- Set planned years to exit.
Frequently Asked Questions
Why is cash-out refi bad when I have a low rate?
Because the new rate applies to the entire balance, not just the cash-out portion. Trading a 3.5% rate for a 7.25% rate on $235k adds $450+/month to the existing mortgage in addition to the new $80k cash-out cost.
Does HEI always beat cash-out refi in this scenario?
Usually yes when legacy rate is well below current. But if appreciation runs hot (6%+), HEI payback grows fast and can exceed cash-out cost. Break-even depends on appreciation assumption.
Are there tax differences?
Cash-out refi interest is deductible if proceeds used for home improvement and under $750k acquisition debt. HEI payback is not interest expense and not deductible. Factor after-tax math if itemizing.
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