If your Florida home has gained value and you need money for a roof, a tuition bill or a debt you want to clear, two loans can turn that equity into cash: a cash-out refinance and a home equity line of credit (HELOC). They look similar from the outside, but they change your mortgage in very different ways. This guide explains how each one works, what Florida adds to the cost, and how to choose. It is general education, not a quote. Your numbers depend on your lender, your credit and your property.
The short answer
A cash-out refinance replaces your current mortgage with a new, larger one and hands you the difference in one payment. A HELOC leaves your first mortgage alone and adds a second loan secured by your home, which you draw from as you need it. In plain terms: one refinance is a single new loan, while a HELOC is a credit line sitting on top of the loan you already have.
How a cash-out refinance works
With a cash-out refinance, the new loan pays off your existing mortgage, closing costs and any prepaid items such as taxes or insurance. Whatever is left goes to you as cash at closing. The Bank of America mortgage guide describes it this way: the new loan gets a fresh amortization schedule, so the payment you make is based on the new balance and new term.
That fresh schedule matters. If your current loan is 12 years into a 30-year term and you refinance into another 30-year loan, you have restarted the clock on the whole balance, even on the part you already paid down. Closing costs also look similar to what you paid on your original purchase loan, so the cash you receive is net of those costs.
How a HELOC works
A HELOC is a second mortgage. Your first mortgage stays exactly as it is, and the HELOC sits in second position with its own limit and payment schedule. The Consumer Financial Protection Bureau explains that you can borrow, repay and borrow again up to the limit, much like a credit card, and that HELOCs usually carry adjustable interest rates. Your payment moves with the balance you owe and with the rate.
HELOCs have two phases. During the draw period, which is commonly about 10 years, you can borrow as needed. Then the repayment period begins, commonly around 20 years, and you can no longer draw. Some HELOCs allow interest-only payments during the draw period, which keeps payments low but does not reduce what you owe. Check the draw period, rate type and repayment terms in writing before you sign.
The Florida cost you need to check
Florida charges a documentary stamp tax on recorded mortgages and promissory notes. Under Florida Statutes section 201.08, the rate is 35 cents on each $100 of the debt secured, and the same rate applies to mortgages recorded in the state. That means a cash-out refinance that creates a new, larger recorded loan can carry this tax on the full new principal, not only on the cash you take out. Ask your lender for the exact stamp tax figure on your Loan Estimate and compare it across offers, because it is a real cost that can change which option is cheaper.
Closing costs are the other major difference. A cash-out refinance usually carries closing costs close to those of your original mortgage. A HELOC often has little or no closing cost, but some lenders charge fees, and some require a minimum draw or an annual fee. Read the fee schedule, not only the rate.
Side-by-side comparison
| Feature | Cash-out refinance | HELOC |
|---|---|---|
| What happens to your first mortgage | Replaced by a new loan | Stays in place |
| How you get the money | One lump sum at closing | Draw as needed during the draw period |
| Typical rate type | Fixed or adjustable, depending on the loan | Usually adjustable |
| Closing costs | Similar to a purchase mortgage | Often low, but check for fees |
| Florida documentary stamp tax | Applies to the new recorded loan | May apply to the recorded credit line; ask your lender to confirm |
| Best known for | Lower rate on the whole balance, one payment | Keeping a low first-mortgage rate and borrowing as needed |
What lenders look at
Both loans are secured by your home, so the lender measures how much equity you keep. Fannie Mae’s Eligibility Matrix (August 5, 2026 version) sets the maximum loan-to-value for a conventional cash-out refinance at 80% on a one-unit principal residence, and at 75% for two to four units, second homes and investment property. Your loan-to-value is the new total mortgage divided by the home’s value, so a higher appraisal can change the answer. The same matrix ties the minimum credit score for manual underwriting to that loan-to-value, with a higher minimum above 75%. Lenders may set stricter rules, so treat those figures as the ceiling a lender can use, not a promise.
HELOC approval focuses on the combined loan-to-value of both liens, plus your income and debt. Because the lender can see your total debt load, bring the same paperwork you would for a mortgage: recent pay stubs, two years of tax returns, bank statements and a list of current debts.
When a cash-out refinance tends to fit
- Your current first-mortgage rate is higher than what you can get today, so a refinance can lower your rate and pull out cash in one step.
- You need a single, known amount for a defined purpose, such as a major repair with a fixed bill.
- You are comfortable with a new term and closing costs in exchange for one predictable payment.
When a HELOC tends to fit
- Your first mortgage has a low rate you do not want to give up.
- You expect costs to come in over time, such as a phased renovation or a child’s school years, and you want to borrow only what you need.
- You want a standby credit line for emergencies and are willing to accept a variable rate and manage the payments.
If you are unsure, a useful test is to compare the total cost over the years you expect to keep the loan, including stamp tax, closing costs and the interest you will pay, not the monthly payment alone. A lower payment can hide a much longer repayment period.
Steps before you apply
- Get a current estimate of your home’s value and your remaining mortgage balance.
- Decide the amount you need and what it is for, so you do not borrow more than the purpose requires.
- Ask for a Loan Estimate for a cash-out refinance and a separate quote for a HELOC, both with the Florida stamp tax shown.
- Compare rate type, draw and repayment terms, fees and the rate cap for any HELOC.
- Check that your insurance covers the home at its current value, because the new lender will require it. For help with coverage questions, see how homeowners policies differ from dwelling coverage.
If your home needs repair work before a lender will approve the loan, a home inspection is often the first step. Our inspection company, Quality Real Estate Inspections, explains what an inspection covers and how repair items are handled in a guide to eligible and ineligible repairs.
For related reading, see our overview of FHA loans for first-time buyers in Florida, the piece on seller concession limits by loan type, and our Osceola County home loan guide. If you are weighing a sale instead of borrowing against the home, the Central Florida first-time buyer guide from our brokerage covers the buying side.
Frequently asked questions
Is a cash-out refinance or a HELOC cheaper?
It depends on your current first-mortgage rate, how much you borrow, how long you keep the loan and the Florida stamp tax and closing costs on each option. Compare the full cost over the period you expect to keep the loan.
Do I pay Florida stamp tax on a HELOC?
Florida applies the documentary stamp tax to recorded mortgages and notes, and the lender should show the amount on your disclosures. Ask for the exact figure on the credit line before you commit.
Can I get a HELOC if I have a first mortgage?
Yes. A HELOC is designed to sit behind an existing first mortgage. Approval depends on your combined loan-to-value, credit and income.
Can I cash out right after buying a home?
Usually not. Most lenders require a period of ownership before a cash-out refinance, and the rules depend on the loan program. Ask your lender how long you must wait.
Does a cash-out refinance reset my loan term?
Yes. The new loan has a new amortization schedule, so you should compare the new term and total interest with your current loan before refinancing.
Tariq AbouAdma is a licensed mortgage professional with Loan Factory, NMLS 320841, and his individual NMLS 2724176. Loan Factory shops more than 240 lenders, so you can compare cash-out and HELOC offers side by side. Call 407-476-6667 to talk through your options, or visit us at 336 Wilshire Blvd, Suite 274-229, Casselberry, FL 32707.