Should I get a personal loan or a cash-out refinance?

Cash-out refinance basics: You replace your existing mortgage with a new, larger mortgage and receive the difference in cash. Because the loan is secured by your home, rates are far lower than unsecured personal loans. However, you must have equity, pay closing costs ($3,000-$7,000+), and accept a new 15-30 year mortgage term.

When cash-out refinance wins: You need a large amount ($30,000+). You already have significant home equity. You plan to stay in the home long enough to recoup closing costs. Your mortgage rate would not increase materially from current levels. The project improves home value.

When personal loan wins: You need funds quickly (days, not weeks). The amount is under $30,000 where closing costs make cash-out refi uneconomical. You do not own a home or lack sufficient equity. You do not want your home at risk. You are in a period of rising mortgage rates where refinancing your mortgage would substantially increase your monthly payment.

Break-even math for cash-out refi: If refinancing your mortgage from 3% to 7% to access $20,000 in cash increases your monthly mortgage payment by $500, you are paying $6,000/year more just to access that cash. A personal loan at 12% APR on $20,000 over 3 years costs $3,346 in total interest - far less than the $18,000+ extra you would pay on the mortgage over the next 3 years.

Credit score impact: Both trigger a hard inquiry. A mortgage refinance also requires an appraisal and often involves more credit documentation. Personal loan applications are completed in 15-30 minutes online.