Refi or Second Mortgage? Compare the Blended Rate
A cash-out refinance replaces your whole mortgage. A second mortgage leaves it alone and adds a new loan. This calculator works out the blended (weighted) interest rate, the monthly payment, and the total cost of each, so you can see which makes more sense. Results update as you type.
What you enter is not saved. We do not collect it. It stays in your browser and disappears when you refresh or leave this page.
Add credit cards or other debt to pay off
Leave a row at 0 if you do not have it. Whatever you list is paid off at closing, in both options, and added to the loan amount.
“Interest and costs” adds up the interest you pay on every loan in the option, plus the closing costs. It does not include property taxes or homeowners insurance, which are the same either way. The calculator assumes closing costs are added to the new loan, that a second mortgage is paid out in full at one fixed rate, and that you make every payment on time. If you send freed-up money to principal, it goes to the loan with the higher rate first. If you choose a HELOC, its rate can change, so treat the second mortgage numbers as an estimate.
What is a blended (weighted) interest rate?
When you owe money at more than one rate, your overall rate is the average of those rates, weighted by how much you owe at each one. A bigger balance counts for more. For example, if you owe $200,000 at 3% and $50,000 at 8%, your blended rate is ($200,000 × 3% + $50,000 × 8%) ÷ $250,000, which is 4%. It is not simply the average of 3% and 8%, because most of what you owe is at 3%.
Why your current rate matters, and when it does not
A cash-out refinance gives one new rate to your entire balance. If your current mortgage rate is lower than today's rates, you give up that low rate on every dollar you owe, not just the cash you take out. A second mortgage leaves your low-rate first mortgage alone, so your blended rate is a mix of the low first mortgage rate and the higher second mortgage rate. If your current rate is higher than today's rates, the refinance can come out ahead, since it lowers the rate on the whole balance.
The rate is not the whole story, though. When you pay off high-rate debt, your monthly payments can drop a lot. If you send that freed-up money to your mortgage principal, a cash-out refinance can come out ahead even when its rate is higher than your current one. A refinance may also be the only option available if your credit score is under about 650, since many second-mortgage lenders want a higher score. Many lenders offer cash-out refinances down to about a 580 score, and some go as low as 500, usually at a higher cost. Choose “Send it to principal” above to see the effect.
Compared with doing nothing
If you are paying off debt and not taking any cash out, the calculator also shows what happens if you change nothing and keep paying the same total each month, with each paid-off debt’s payment rolling to the next highest-rate balance. That is often the fairest test of whether consolidating makes sense, and it can come out in favor of a refinance even when the new rate is higher than your current one.
What about credit cards?
Paying off credit cards with either option replaces a rate that is often above 20% with a much lower one, and it can cut your monthly payments. It also turns debt that is not tied to your home into debt that is, so the savings only last if the cards stay paid off. Compare the total cost, not just the payment.
Not sure which way to start? Try the equity options tool. To see how much you could borrow, use the equity calculator. If you already have quotes, compare them with the offer comparison tool. For how each loan works, read HELOC vs. home equity loan (HELOAN). A lender can give you actual numbers, and it is worth getting quotes from more than one.