Cash-out Refi vs HELOC?

5 Replies

Greetings BP!

I posted a previous question regarding using equity in a SFH rental I have in San Diego. Its worth 500k and I owe 220k. It is in a 15 year loan with 9 years left. previous question was let it ride or use that equity. overwhelming majority were in favor of using that equity.

now the question is, what are peoples opinions on using a equity loan vs HELOC vs cash out refi? at 80%LTV I can get 100K. 90% I'm at 165K. Even had a few interest only quotes to keep costs down...any thoughts? I've found a few HELOCs in the 4.5-5% range a few HELOCs I've found are variable rate (not a big fan). what are your thoughts? what are some terms y'all have found. anything else I should be considering? thanks

A big advantage I see in HELOCs is flexibility. Because you only pay on what you borrow it means that you have less cash sitting around while you're finishing the next deal. With a cash-out you have to pay interest on the whole sum even if it takes you some time to close on the next purchase. In my experience a HELOC will have a lower rate too but as you said, there is the risk of rising rates.

We opted for a HELOC after finding a regional bank offering 2% interest for the first year, after that variable pegged to prime (in range you mentioned). Might be worth calling a few smaller banks if you haven't already? Also agree with Brian on flexibility point - we ended up not even utilizing our HELOC bc we are relocating a bit unexpectedly (to San Diego!).

Hi Everyone. This is my first post. I would like your guidance on how to maximize my real estate investments. I own two single family homes out right. Both are worth around $200k. I also own a townhome, worth about $175 that still has a small mortgage balance ($30k). The townhouse and one of the houses is rented (both are in TN). Currently, the other house is my primary residence (located in FL). Do you recommend HELOC's or cash-out refi's? I'd like to buy another property. Many thanks for your time and apologies if my message is inarticulate. Thanks! Patty

hey Patty, after all my research and from a few different posts on bigger pockets, I'm taking out a HELOC on both my properties. This way, the equity is basically acting like my bank. Better flexibility, many times better rates. And, as Brian stated above, with an ELOC, you only pay the interest on what you borrow instead of the full amount as in a cash out refi. Just my two cents. Good luck