Write the rate you would destroy. Payoff letter, remaining term, current P&I. If that rate is still a 2020–2021 number, cash-out has to beat that rate on the whole balance, not “today’s average 30-year.” If it cannot, you are shopping a second lien.
Name the use of funds in one sentence you could show an IRS agent. “Finish the basement of 14 Oak” is acquisition tracing. “Pay the Visa and the wedding” is not. 2026 does not give you a $100,000 home-equity deduction for consumer debt. If you will not itemize (2026 standard deduction $16,100 / $32,200 / $24,150), skip the tax daydream entirely.
Size 12 months of actual spend, not the credit limit. A $90,000 HELOC because the bank offered it is how a kitchen becomes a boat. Put the 12-month number in the calculator. Combined LTV on current value — get a broker price opinion or a recent sale, not Zillow-plus-hope.
Ask for three quotes on the same cash number: (a) HELOC, interest-only draw, (b) fixed home-equity loan amortizing 10 or 15, (c) cash-out refinance, costs itemized, PMI if LTV > 80%. Same cash extracted. Do not let a loan officer pick the product before you see all three Loan Estimates / HELOC disclosures.
Price closing costs as a percent of cash extracted, then as a percent of the new first lien. $7,500 / $50,000 = 15% friction to pull kitchen money. $7,500 / $330,000 is a refinance. If cash-out also drops your rate, run the break-even tool on the whole new loan. Rolling costs in is still a cost.
Shock the HELOC +2%. If that package payment (old P&I + shocked HELOC) does not fit next to the emergency fund, you wanted a fixed HELOAN or you wanted to wait. Prime is not a personality trait.
Rebuild DTI with the new line before you apply. Interest-only looks kind. The repayment period does not. Use the harsher payment in the DTI calculator. A cash-out that resets to 30 years can lower the payment and raise lifetime interest — say which one you are optimizing.
Do not raid reserves to look house-rich. Tapping equity because the HYSA is empty is a job-loss away from two liens and no runway. Floor: three months of PITI + the new payment, after closing. Authorized-user theater and a new car in the same month will reopen underwriting.
If the cash is to kill 22% cards, run the after-payoff rule. Close or freeze the cards. A HELOC at 8% that becomes $50,000 of HELOC plus the cards again is a more expensive house, not a debt plan. Sequence: payoff letters, then the draw, then the cards closed. The debt-free playbook is the other half.
Recast vs cash-out vs HELOC. Recast is for putting a lump sum in (same rate, lower payment, small fee). Cash-out is for taking money out and accepting a new first lien. HELOC is for taking money out and keeping the first lien. Do not let a refi shop talk you out of a recast you already qualified for.
Hard-stop list: a HELOC as a checking account, a cash-out to invest in the market with a 3% mortgage you would give up, a draw the week before a job hop, and signing a 30-year reset because the payment shrank. If CLTV still needs 90%+ after you cut the cash number, wait or sell — do not invent equity.
One-page decision
Cheap first lien + modest, time-boxed cash: HELOC or HELOAN. New rate that actually beats the old one + you will stay past break-even: cash-out, priced as a refinance. Consumer-debt payoff: only if the cards die the same week and DTI still works. Tax deduction: only if you improve this house, sit under $750,000 of acquisition debt, and itemize. Everyone else is shopping a payment, not a write-off.