Home Equity Alternatives to a Cash-Out Refinance

When interest rates rise or your financial goals shift, a cash-out refinance might not be the best option for accessing home equity. Fortunately, there are several alternatives to consider – each with its own benefits, drawbacks, and ideal use cases. This guide explores six popular alternatives to a cash-out refinance and when each one might make more sense.

1. Home Equity Line of Credit (HELOC)

A HELOC is a revolving line of credit that allows you to borrow against your home equity, similar to how a credit card works. You’re approved for a maximum amount and can draw funds as needed during a set draw period (usually 5–10 years), followed by a repayment period.

HELOC vs. Cash-Out Refinance

• A HELOC offers flexibility: borrow only what you need, when you need it.

• Cash-out refinancing gives you a one-time lump sum and resets your mortgage.

• HELOCs usually have variable interest rates, while many cash-out refinances have fixed rates.

Pros:

• Lower upfront costs

• Interest may be tax-deductible (if used for home improvements)

• Pay interest only on what you borrow

Cons:

• Variable rates may increase over time

• Your home is collateral, so there’s always a risk of foreclosure if you default

• Requires some personal discipline to avoid overspending

2. Home Equity Loan

A home equity loan is a second mortgage that provides a lump sum upfront, repaid in fixed monthly installments over a set term. Interest rates are typically fixed.

Home Equity Loan vs. Cash-Out Refinance

• A home equity loan is a separate “second mortgage” – you’re not refinancing.

• Cash-out refinancing, on the other hand, replaces your mortgage with a larger one, typically resetting the loan term.

Pros:

• Fixed interest rate and predictable payments

• Lower rates than unsecured personal loans

• Access to funds without affecting your primary mortgage

Cons:

• Adds a second monthly payment

• Requires sufficient home equity and good credit

• Risk of foreclosure if you fall behind

3. Personal Loan

A personal loan is an unsecured loan – meaning you don’t put your home up as collateral – and typically offers a lump sum repaid over a short term (2–7 years).

Personal Loan vs. Cash-Out Refinance

• No home equity needed or mortgage changes

• Faster approval and funding timeline

• Higher interest rates due to lack of collateral

Pros:

• Quick access to funds

• No risk to your home

• Can be used for nearly any purpose

Cons:

• Higher interest rates than secured loans

• Shorter repayment terms mean higher monthly payments

• May be harder to qualify for large loan amounts

4. Reverse Mortgage

Available to homeowners age 62+, a reverse mortgage converts part of your home equity into cash. Unlike traditional loans, you don’t make monthly payments – the loan is repaid when the home is sold or the borrower passes away.

Reverse Mortgage vs. Cash-Out Refinance

• No monthly payments required with a reverse mortgage

• Age and equity requirements limit eligibility

• Cash-out refinancing requires ongoing repayment

Pros:

• No monthly payments

• Can supplement retirement income

• Stay in your home while accessing equity

Cons:

• Fees and closing costs can be high

• Interest accrues over time, reducing remaining equity

• May affect eligibility for certain government benefits

5. Home Equity Sharing Agreement

A home equity sharing agreement allows you to access a portion of your equity in exchange for a share of your home’s future appreciation. With Unison, for example, you can receive up to 15% of your home’s current value in cash – without taking on debt or monthly payments.

Equity Sharing vs. Cash-Out Refinance

• Equity sharing doesn’t add monthly payments or carry any interest

• You retain full ownership and can sell or buy out Unison anytime within 30 years

• Unison shares in your home's appreciation or depreciation

Pros:

• No added debt

• Long-term flexibility

• Downside protection if home value falls

• The capital improvement adjustment feature allows you to increase your home’s value without increasing Unison’s share, helping you keep the full value of upgrades you make.

Cons:

• You share a portion of future appreciation

• Not suitable for all financial situations or timeframes

• May impact refinance or resale timelines

6. Equity Sharing Home Loan (ESHL)

The ESHL is a 10-year, interest-only mortgage with a twist: in exchange for a lower interest rate today, Unison shares in a portion of your home’s future appreciation. A portion of the interest can even be deferred if needed, lowering monthly payments further.

ESHL vs. Cash-Out Refinance

• ESHL likely offers significantly lower monthly payments during the loan term

• You retain control and flexibility with your property

• Repayment includes the original loan plus shared appreciation when you sell, refinance, or buy out Unison

Pros:

• Lower monthly payments than traditional loans

• Partial interest deferral available (up to 25%)

• Flexible terms – no prepayment penalty if you decide to pay off early

• Capital improvement adjustments can help you keep more of the value driven by your home improvement projects.

Cons:

• Shared appreciation component means potentially giving up a portion of future gains

• Only available in select states and situations

• Not ideal if you plan to sell in the very near term

Choosing the Right Option

The right home equity solution depends on your financial goals, risk tolerance, and timeline. A cash-out refinance may still be the right move for some, especially when mortgage rates are low. But these alternatives offer greater flexibility, access, or affordability in different situations.

Want to see how much equity you can unlock without refinancing? Get a free estimate today — with no credit check or obligation.

Disclaimer: This content is provided for general informational and educational purposes only and is not intended to serve as financial, investment, legal, tax, or lending advice. The information presented may not apply to your specific situation, and actual outcomes can vary based on individual circumstances, market conditions, and applicable laws. Home equity sharing agreements and loans involve risks, including the potential loss of future home appreciation or other financial implications. Terms, availability, and eligibility for any products mentioned may differ by state, lender, or other factors. We strongly recommend consulting with a qualified financial advisor, attorney, or licensed professional before making any decisions or entering into agreements. Unison Mortgage Corp. is a licensed lender (NMLS ID 2574289); this article may include promotional content related to its services.