Cash-Out Refinance vs Personal Loan: Closing Costs, Your Home and the 3-Day Right to Cancel

Published by the Modern Lending Solutions editorial team. Last reviewed: October 30, 2026.

Short answer: a cash-out refinance replaces your mortgage with a larger one and pays you the difference. A personal loan is a separate loan, and when it is unsecured your home is not the collateral. A cash-out refinance comes with closing costs and puts more of your debt on your home. Compare the Loan Estimate for the refinance with the total cost of a personal loan before you choose. This is general information, not legal or financial advice.

How a cash-out refinance works

A January 2025 CFPB report says: “A cash-out refinance is one way homeowners can tap into their home equity”, and that home equity is “the home’s value minus all home-secured debt” (CFPB, January 2025). The new loan pays off the old mortgage, and the extra amount is paid to you. For a line of credit or a second loan on your home instead, see HELOC vs personal loan.

Your home is the collateral

The same CFPB report says paying off other debts with home equity “can make financial sense if the cost of extracting cash with the refinance (the interest on the new mortgage amount, plus any origination fees) is less than the cost of continuing to pay down other higher-interest debt”. It also says “converting non-mortgage debts into mortgage debt secured by the home can put the home at risk of foreclosure if payments become unsustainable, while defaulting on a non-mortgage debt is unlikely to result in loss of the home” (CFPB, January 2025).

Closing costs

The CFPB says: “There are services rendered and costs related to originate all mortgages”. A loan advertised with no closing costs works one of two ways: a higher interest rate with a credit to cover the cost, or “adding the closing costs to your loan amount”. “A higher interest rate will mean you pay more over time and a higher loan amount will increase your payments and reduce your equity” (CFPB, page last modified April 26, 2024, which may be outdated, read October 30, 2026).

The Loan Estimate and Closing Disclosure

For a closed-end consumer loan secured by real property (other than a reverse mortgage), Regulation Z says the creditor must deliver or mail the Loan Estimate “not later than the third business day after the creditor receives the consumer’s application” (12 CFR 1026.19(e)(1)(i) and (e)(1)(iii)(A), eCFR, text up to date as of October 28, 2026, read October 30, 2026). The creditor must also make sure you receive the Closing Disclosure “no later than three business days before consummation” (1026.19(f)(1)(ii)(A)).

The CFPB says: “Request multiple Loan Estimates from different lenders so you can compare and choose the loan that’s right for you”, and “When comparing Loan Estimates, make sure to compare the origination charges” (CFPB, page last modified October 29, 2025, read October 30, 2026).

The right to cancel (rescission)

When a security interest is taken in your principal dwelling, Regulation Z gives each owner whose interest is subject to it “the right to rescind the transaction”, with exceptions (12 CFR 1026.23(a)(1), eCFR, text up to date as of October 28, 2026, read October 30, 2026). You can cancel “until midnight of the third business day following consummation, delivery of the notice required by paragraph (b) of this section, or delivery of all material disclosures, whichever occurs last” (1026.23(a)(3)(i)). You give notice in writing (1026.23(a)(2)). Unless you waive the right, “no money shall be disbursed other than in escrow” until the period has ended and the creditor is reasonably satisfied you have not cancelled (1026.23(c)).

For rescission, a business day means “all calendar days except Sundays and the legal public holidays” listed in federal law (12 CFR 1026.2(a)(6), eCFR). So Saturdays count.

Two exceptions in 1026.23(f) matter here:

A loan to buy or build your home (a “residential mortgage transaction”) has no right to cancel (1026.23(f)(1)). A refinance is not that kind of loan.
A refinance by the same creditor of a loan already secured by your principal dwelling is exempt, except that the right applies “to the extent the new amount financed exceeds the unpaid principal balance, any earned unpaid finance charge on the existing debt, and amounts attributed solely to the costs of the refinancing” (1026.23(f)(2)). With a new creditor, that exception does not apply.

An example, only for the math

This example is only for the math. The mortgage balance, cash amount and closing costs are example figures, not amounts any lender quoted, and no mortgage rate is assumed. Say you owe $150,000.00 on your mortgage, want $20,000.00 in cash, and have $4,000.00 in closing costs added to the loan amount. The new loan is $150,000.00 + $20,000.00 + $4,000.00 = $174,000.00, which is $24,000.00 more than you owe now.

If the refinance is with the same creditor and there is no earned unpaid finance charge, the part with a right to cancel is the amount over the old balance and the refinance costs: $174,000.00 − $150,000.00 − $4,000.00 = $20,000.00. If you sign on Friday, November 6, 2026, with the notice and all material disclosures given that day, the third business day after is Tuesday, November 10, 2026 (Saturday counts, Sunday does not), so you could cancel until midnight that day. Your notice and disclosures show the real date.

For the personal loan side: $20,000.00 over 24 months at the Federal Reserve’s August 2026 average of 11.90% APR for 24-month personal loans at commercial banks (G.19) is $940.54 a month, or $2,572.96 in interest and $22,572.96 in total ($940.54 x 24 = $22,572.96). Your rate depends on your credit and the lender, and fees raise the cost. For the refinance, the Loan Estimate shows the rate, the monthly payment and the closing costs to set against those numbers.

Questions to ask

What are the closing costs, and are any of them added to the loan amount?
What is the new interest rate and APR, and how do they compare with my current mortgage?
How long will the new loan run, and what is the total I will pay?
Is this a refinance with my current creditor or a new one? Which part of the loan can I cancel?
When does the right to cancel end, and when will the cash be paid out?
For a personal loan: what is the APR, the origination fee and the total of payments?

Checklist

Get Loan Estimates from more than one lender and compare the origination charges.
Check whether closing costs are added to the loan amount.
Compare the total cost of the refinance with the total of payments on a personal loan.
Remember that a cash-out refinance puts the new debt on your home.
Read the Closing Disclosure before you sign, and keep the notice of your right to cancel.

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Sources

Disclosure: Modern Lending Solutions is not a lender, loan broker or agent for any lender or loan broker, and does not make credit decisions. Any compensation we receive is paid by participating lenders, only for advertising services. This guide is general information, not financial or legal advice.

Cash-Out Refinance or Personal Loan: What to Compare