Refinance vs HELOC vs Personal Loan: Compare Costs

A refinance replaces your existing mortgage, a home equity line of credit (HELOC) lets you borrow against home equity as needed, and a personal loan is usually a separate installment loan. This calculator estimates a fixed-rate personal loan’s monthly payment and total interest; enter the amount, APR, and term to see the results.

Formula

The calculator uses the standard fixed-payment loan formula. Let P be the amount borrowed in dollars, a the annual percentage rate (APR) in percent, r = a / 1200 the monthly rate as a decimal, and n = 12 × y the number of monthly payments for a term of y years.

• Monthly payment = P × r / [1 − (1 + r)⁻ⁿ].
• Total interest = monthly payment × n − P.

The calculator’s total-interest result uses the unrounded payment expression in the specification. Real loan schedules can differ because lenders round payments and interest by payment period, and may include fees or other charges. Treat the output as an estimate, not a lender quote.

Worked Example

Using the defaults—$20,000 borrowed, 8% APR, and five years:

1. Monthly rate: 8 ÷ 1,200 = 0.0066667.
2. Number of payments: 5 × 12 = 60.
3. Monthly payment: $20,000 × 0.0066667 ÷ [1 − (1.0066667)⁻⁶⁰] ≈ $405.53.
4. Total interest: $405.53 × 60 − $20,000 ≈ $4,331.80.

The displayed monthly payment is rounded to cents. The calculator’s total-interest expression uses the payment formula before display rounding, so it may differ slightly from multiplying the displayed payment by the number of payments.

Assumptions

• The interest rate is fixed for the full term.
• Payments are equal and made monthly, with the first payment one month after borrowing.
• Interest compounds monthly at APR divided by 12.
• The estimate excludes fees, taxes, insurance, PMI, and escrow; those costs are not calculator inputs.

How the Three Borrowing Options Work

A cash-out refinance replaces the current mortgage with a new mortgage. The new loan may be larger than the unpaid mortgage balance, and the borrower receives the difference after applicable costs and payoffs. The entire mortgage balance is then governed by the new loan’s terms. This differs from refinancing a mortgage without taking cash out, which generally changes loan terms without providing equity proceeds.

A HELOC is revolving credit secured by the home. A lender sets a credit limit, and the borrower can draw funds as permitted by the agreement, often during a defined draw period. The balance can change as money is borrowed and repaid. Rates may be variable, and payments can change; the agreement determines draw, repayment, and payment terms.

A personal loan is generally an unsecured installment loan: the borrower receives a lump sum and repays it in scheduled installments. It does not directly put the home up as collateral, but the lender sets the rate, term, fees, and eligibility requirements. This calculator models only a fixed-rate installment payment, not every personal-loan contract.

Comparing Costs and Risks

Compare the same borrowing amount and repayment period when possible. A lower monthly payment alone does not show that borrowing costs less: extending repayment can increase total interest. For a refinance, account for the full new mortgage, not only the cash received. For a HELOC, consider how a variable rate could affect payments and how the balance will be repaid. For a personal loan, use its APR and disclosed fees, not only an advertised payment.

• Collateral: A refinance and HELOC are secured by the home. Failing to meet the agreement’s obligations can put the home at risk. A personal loan is usually unsecured, but missed payments can still have financial consequences.
• Rate structure: A fixed rate keeps the scheduled interest rate unchanged; a variable rate can move under the contract’s terms. Verify whether each offer is fixed or variable.
• Fees and timing: Mortgage refinancing and a HELOC may involve costs and setup steps. Personal loans can also have fees. Ask for a written disclosure showing the amount financed, APR, payment schedule, and total repayment.
• Access to funds: A refinance typically provides proceeds at closing, a HELOC can provide access over time, and a personal loan usually pays a lump sum. Availability and timing depend on the lender and contract.

How to Compare Offers

First identify how much money is needed and when it is needed. Then compare written offers using the same amount and a realistic payoff schedule. If comparing a refinance, include the existing mortgage balance and the new mortgage’s full repayment; if comparing a HELOC, examine both the draw period and repayment period. For a personal loan, check whether the quoted payment assumes a fixed rate and whether fees are deducted from proceeds or added to what is owed.

Do not assume home equity is immediately available or that a particular option will be approved. Lenders assess applications under their own criteria, and terms vary by offer. A useful comparison includes the cash received, payment amounts and timing, rate-change provisions, fees, and total repayment under clearly stated assumptions.

Common Misconceptions and Calculator Limits

A HELOC is not simply a personal loan with a different name: it is revolving credit secured by a home, while a personal loan is commonly a fixed installment balance. A refinance is not a separate small loan either; it replaces the mortgage, which can change the terms on a much larger balance.

This calculator cannot determine whether refinancing or a HELOC costs less. It has no inputs for an existing mortgage, variable-rate changes, fees, draw timing, taxes, or lender-specific payment rules. Use it to understand a simplified personal-loan payment, then compare actual disclosures. For a variable-rate HELOC, a single APR calculation cannot forecast future payments.

Frequently Asked Questions

Is a HELOC the same as refinancing?
No. A HELOC is a revolving credit line secured by the home; refinancing replaces the existing mortgage with a new mortgage.

Does a personal loan use my house as collateral?
Most personal loans are unsecured, but contract terms vary. Review the loan agreement to confirm whether collateral is required.

Can a HELOC payment change?
It can, particularly when the rate is variable or the agreement moves from a draw period to repayment. Check the contract’s rate and payment provisions.

Which option has the lowest total cost?
There is no universal answer. Costs depend on the amount borrowed, rate, term, fees, repayment pattern, and—where applicable—changes to the rate. Compare written offers on consistent assumptions.

Does a lower monthly payment mean I pay less overall?
Not necessarily. A longer repayment period can lower each scheduled payment while increasing total interest. Compare total repayment as well as the monthly amount.

This result is an estimate for education, and the lender’s disclosure gives the exact figures.

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in p | Loan amount | $ | 20000 | 1 | 100000000
in apr | Interest rate (APR) | % | 8 | 0.01 | 100
in yrs | Loan term | years | 5 | 0.0833 | 50
out pmt | Monthly payment | $ | p * (apr / 1200) / (1 - (1 + apr / 1200) ^ -(yrs * 12)) | 2
out int | Total interest | $ | pmt * yrs * 12 - p | 2