Cash out refinance silly question

[Connor Castillo]

Hey all,

I know this is very much a noob question. When you are pulling out a cash, but you pay interest once you use that cash? For example. I pull out 100K from one of my rentals. If I use that 100K, do I pay interest on that money?

[Laura Navaquin]

Hi @Connor Castillo, 

Not a crazy question at all!This is an important concept to understand. 

In a; 

Cash-Out Refi: You’re refinancing the property for a higher loan amount and getting the difference in cash. You start paying interest on the full amount immediately.

HELOC: Works like a credit line so you only pay interest on the amount you actually use, not the full approved limit.

So, if you pull out $100K from a cash-out refi, you're paying interest on the full $100K right away. But if it's a HELOC and you only use $50K, you're only paying interest on that $50K until you borrow more. Hope that helps.