Let's say you have a home that's worth $150,000 and you owe $100,000 on the mortgage. That means you have $50,000 of equity in your home, which is like having $50,000 in a savings account. A cash-out refinance allows you to access that equity. For instance, if you need $10,000, you can refinance your mortgage so that you owe $110,000 and the lender then gives you $10,000 in cash at closing.

With a home equity loan, you keep your original mortgage and take out a second mortgage for the amount of equity you are tapping into.

Since every homeowner's situation is different, your best option will depend on your specific circumstances. When you compare home equity loans and cash-out refinance further, there are four things you should consider in order to determine what's best for you:

Speed

How fast do you need the money? Home equity loans close considerably faster than a refinance - in as little as five days. That might be important to you.

Cost

Home equity loans typically require minimal fees. Refinancing, on the other hand, may carry higher loan fees and possibly points.

Rate

Because a home equity loan is a second mortgage, it typically has a higher rate than a cash-out refinance (a reflection of its higher risk to the lender). But if you already have a great rate on your mortgage, it may be worthwhile to get a home equity loan - even at a higher rate - rather than refinance and lose the low rate you already have on your first mortgage.

Term

When refinancing, you are generally limited to a term of 15 or 30 years. With a home equity loan, you have more flexibility and can take advantage of a shorter term - greatly reducing your overall interest costs.

A mortgage lender can help you compare a cash-out refinance or a home equity loan. With a competent mortgage expert to guide you, you'll have no trouble determining which type of loan is right for you.