Please forgive me if this is a dumb question. I'm brand new to the idea of real estate investing and am trying to formulate a plan in order to acquire my first rental property. My primary residence is worth $250k and I owe $130k on my mortgage. I am trying to scrape together some cash for a down payment on my first property. Do I ? A) Do a cash out refi for $200k and use the $70k to payoff a high interest truck loan and then use the remaining $49k for 1 or 2 down payments. OR B) Get a $50k HELOC, pay off the truck ($21k) leaving me $29k for a down? I guess I don't understand the pros & cons of the 2. Please help
The typical HELOC rate is between 4 and 5% depending on how much you borrow. If your truck payment % is higher, then it makes sense to replace it with HELOC. You could pay of truck and use the remaining HELOC for down payment. Just make sure your debt to income ratio allows you to have essentially 3 mortgages. The bank or credit union can help you figure out your DTI. And then down the line , when your HELOC Is paid of you can re-use it. While cash out refinance has pretty big closing costs and it's one time deal, HELOC will cost you like $90 to open.
Just my thoughts