HEI vs. HELOC vs. Cash-Out Refinance: Which Way to Tap Your Equity Fits You?
Key takeaways
- A HELOC is a revolving line of credit secured by your home, usually with a variable rate. You draw what you need and repay it with interest.
- A cash-out refinance replaces your current mortgage with a larger one and pays you the difference in cash. Your whole mortgage moves to the new rate and term.
- Both loans add debt, come with monthly payments, and depend on your credit and income. Missing payments can put your home at risk.
- A StayFrank HEI has no monthly payment, no interest, and no added debt. Most homeowners can access 10% to 25% of their home’s current value.
- HEI qualifying is flexible: a minimum FICO of 500 and no income verification. The term runs up to 30 years with no prepayment penalties, and every HEI has a maximum return cap.
- The HEI tradeoff: at settlement you pay back the original amount plus an agreed-upon share of your home’s appreciation. If your home loses value, StayFrank’s share goes down too.
What is a HELOC?
A home equity line of credit (HELOC) is a revolving line of credit secured by your home 1. You’re approved for a limit, draw money as you need it during a draw period, and repay what you borrow with interest. HELOC rates are usually variable, so your payment can rise when rates do. Because your home secures the line, falling behind on payments can put the home at risk.
A HELOC works well for homeowners with strong credit and steady income who want flexible access to cash over time, such as for a renovation paid in stages.
What is a cash-out refinance?
A cash-out refinance replaces your existing mortgage with a new, larger mortgage and pays you the difference in cash 2. You end up with one loan, one monthly payment, and a new interest rate and term on the entire balance, not just the cash you took out. Refinancing also comes with closing costs.
A cash-out refinance can make sense if today’s rates are at or below your current rate and you need a large amount. If your existing rate is lower than today’s, you give up that rate on your whole mortgage to get the cash, which is the hidden cost many homeowners miss.
What is a home equity investment?
A home equity investment (HEI) gives you a lump sum of cash today in exchange for a share of your home’s future value. It isn’t a loan: there’s no monthly payment, no interest, and no added debt. You stay on title, keep the deed, and make every decision about the property; StayFrank records a lien to protect its investment, similar to how a mortgage lender does.
With StayFrank, most homeowners can access between 10% and 25% of their home’s current value, typically keeping about 25% equity after the investment. The minimum FICO is 500 and there’s no income verification. The term runs up to 30 years, and you can settle any time with no prepayment penalties: sell the home, refinance, or use savings to buy out StayFrank’s share. For the full explainer, read What Is a Home Equity Investment?
HEI vs. HELOC vs. cash-out refinance at a glance
| Feature | Home equity investment (StayFrank) | HELOC 1 | Cash-out refinance 2 |
|---|---|---|---|
| Is it a loan? | No | Yes, a credit line | Yes, a new mortgage |
| Monthly payment | None | Yes | Yes, on the whole new mortgage |
| Interest | None | Yes, usually variable | Yes, on the full balance |
| How you get the money | Lump sum | Draw as needed | Lump sum at closing |
| Minimum credit | FICO 500 | Set by the lender; typically higher | Set by the lender; typically higher |
| Income verification | None | Yes | Yes |
| Shows on credit as debt | No | Yes | Yes |
| Your current mortgage | Stays as it is | Stays as it is | Replaced |
| If your home loses value | StayFrank’s share goes down too | You still owe the full balance | You still owe the full balance |
| Best for | Cash now with no new monthly payment | Flexible draws if you qualify | Large amounts when rates are favorable |
Which one costs the least?
It depends on what you can qualify for and how long you keep the money. A loan’s cost is interest, paid every month for as long as you carry a balance. An HEI’s cost is a share of your home’s future appreciation, paid once when you settle, and every StayFrank HEI includes a maximum return cap that limits how much you can owe even if your home appreciates quickly.
The honest rule of thumb: if you easily qualify for a low rate and are comfortable with another monthly payment, borrowing may cost you less over time. If a new payment would strain your budget, a lender has said no, or you want to share the downside risk instead of owing a fixed balance, an HEI is designed for exactly that.
All three come with closing costs. With a StayFrank HEI, standard third-party costs (appraisal, title insurance, escrow, recording fees, and a one-time origination fee) are deducted from your funding, so nothing comes out of pocket.
How to choose
A HELOC may fit if…
- You have strong credit and steady, documentable income.
- You want to draw money over time instead of all at once.
- You’re comfortable with a payment that can change as rates move.
A cash-out refinance may fit if…
- Current rates are at or below your existing mortgage rate.
- You need a large lump sum and want a single mortgage payment.
- You qualify easily on credit and income.
A home equity investment may fit if…
- You want cash now with no new monthly payment and no interest.
- Your credit took a hit, your income is hard to document, or a bank said no. The minimum FICO is 500, with no income verification.
- You want to keep your current mortgage and its rate untouched.
- You’d rather share risk than owe a fixed balance no matter what your home is worth.
Not sure you want to stay in the home long-term? Selling with a sale-leaseback lets you cash out fully and keep living there for up to three years. See every way to get equity out without a loan.
HEI vs. HELOC vs. cash-out refinance: common questions
Is a home equity investment cheaper than a HELOC?
Not always. A HELOC’s cost is interest paid monthly; an HEI’s cost is an agreed-upon share of your home’s appreciation, paid once at settlement and limited by a maximum return cap. If you qualify for a low rate and can carry the payment, a HELOC may cost less. If you can’t or don’t want a monthly payment, the HEI’s no-payment structure is the point.
Can I get a home equity investment if I already have a HELOC or second mortgage?
Often, yes. Your offer depends on your home’s value and what you already owe against it, and you typically need about 25% equity remaining after the investment. Enter your address and we’ll show you an estimate.
Will an HEI affect my credit like a HELOC does?
No. An HEI isn’t a loan, so it isn’t reported to the credit bureaus as debt and doesn’t affect your credit utilization. A HELOC is a credit line and shows up on your credit report 1.
Do I lose my current mortgage rate with an HEI?
No. An HEI doesn’t touch your existing mortgage. A cash-out refinance replaces it, so the new rate applies to your whole balance 2.
How fast can each one close?
Timelines vary by lender for HELOCs and refinances. A StayFrank HEI can close in as little as two to three weeks once underwriting is complete.
Sources
- Consumer Financial Protection Bureau — “What is a home equity line of credit (HELOC)?” https://www.consumerfinance.gov/ask-cfpb/what-is-a-home-equity-line-of-credit-heloc-en-106/
- Consumer Financial Protection Bureau — “What is a cash-out refinance?” https://www.consumerfinance.gov/ask-cfpb/what-is-a-cash-out-refinance-en-1965/
StayFrank product details above reflect StayFrank’s own program disclosures and are summarized for general education; they are not an offer. This article is not financial, legal, or tax advice.