Cash-Out Refinance

Refinancing for an amount in excess of the balance of the original loan. The borrower takes "cash-out" of the transaction.

Home Equity Loan

A mortgage loan with a second-priority claim against a property in the event that the borrower defaults. The lender who holds the second mortgage gets paid only after the lender holding the first mortgage is paid.

Home Equity Line of Credit (HELOC)

A mortgage established as a line of credit against which a borrower can draw up to a maximum amount, as opposed to a loan for a fixed dollar amount. For example, using a standard mortgage one might borrow $100,000, which would be paid out in its entirety at closing. Using a HELOC instead, the borrower receives the lender?s commitment to advance up to $100,000, in an amount and at a time of the borrower?s choosing. The borrower can draw on the line by writing a check, using a special credit card, or in other ways.

Typically, interest rates for mortgage refinance loans are less than that of a home equity loan or line of credit.