Home equity loans and cash-out mortgage refinances are both potential ways to get money for home renovations or unexpected expenses. That said, both options have their pros and cons.
While a home equity loan is a "second mortgage" that allows you to borrow additional funds for nearly any purpose, a cash-out refinance replaces your existing mortgage. With a cash-out refinance, you'll take out a new mortgage for more than your outstanding loan balance, and then withdraw the difference in cash. Because of this, a home equity loan is typically best if you already have a good rate and terms on your current mortgage. A cash-out refinance only makes sense if you can qualify for a better interest rate on your mortgage and you don't mind resetting your repayment term.