Home Equity Loan vs. HELOC vs. Cash-Out Refinance: Which Is Right for You?
If you own a home in Annapolis, there's a good chance you're sitting on significant equity. Median home values are hovering around $650,000-$660,000 — which means many local homeowners have six figures available to put to work. The real question is how to access it wisely.
Three options: a home equity loan, a HELOC, and a cash-out refinance. Each works differently. Here's the plain-English breakdown.
At a Glance
| Home Equity Loan | HELOC | Cash-Out Refinance | |
|---|---|---|---|
| Funds | Lump sum | Partial Lump Sum then draw as needed | Lump sum |
| Rate | Fixed | Variable | Fixed |
| Your mortgage | Unchanged | Unchanged | Replaced |
| Avg. rate* | ~8.0% | ~7.25% | ~6.5% |
| Closing costs | Moderate | Low | 2%–5% of loan |
*National averages, April 2026. Your rate depends on credit score and equity.
Home Equity Loan
A lump sum at a fixed rate, repaid in equal monthly installments. Your existing mortgage stays exactly as-is. Best if you know exactly how much you need and want payment certainty — a kitchen remodel, a debt payoff, a major one-time expense.
HELOC
A revolving line of credit secured by your equity — draw what you need, when you need it, and only pay interest on what you use. The rate is variable, so payments can shift. Best for ongoing projects, uncertain costs, or homeowners who want a financial safety net without a fixed monthly obligation.
Cash-Out Refinance
You replace your existing mortgage with a new, larger home mortgage loan and pocket the difference. You end up with one loan and one payment. The rate is lower than a home equity loan — but you're refinancing your entire mortgage, which only makes sense if today's rate is competitive with what you already have.
The One Question That Decides It
What rate is on your current mortgage?
• Below 5%: Use a home equity loan or HELOC. Protect your primary rate.
• Above 6.5%: A cash-out refinance is worth comparing — you may be able to lower your rate and get cash at the same time.
