Rental Property Investor · Orlando, FL · Member since 2016 · 17 posts · 7 votes
My primary residence has 200k+ of equity(due to significant rehab and market growth). We've decided to move to another home, keep this as a rental and plan to aggressively invest in RE via BRRRR strategy. Trying to decide if I should use a HELOC or REFI from 15 to 30yr and have my cash up front(keeping monthly payment the same). We currently airbnb 1 of the units so the house already pays for itself. Moving would generate additional income from the second unit.
Hey Antoinette! I personally like both strategies depending on what you are trying to do. They both can work great. I have personally used both. I will just briefly describe how I used both:
Refinance- I did this because I had equity in a duplex that was on a 15 year loan. I refinanced into a 30year and pulled out enough money to use as a down payment for my next. I did not have anywhere near what you have. Moving it into a 30 year allowed me to keep my monthly payment the same and still have access to the money. Win! My plan was to hold both investments for the long term so I wanted to lock in the lowest payment I could with a fixed rate.
HELOC- I used this strategy when my plan was to use the money more like a credit card than the previous strategy I described. I pulled the money out and bought a place then fixed it up and refinanced into longer term financing. At which time I paid back the HELOC (so I was not paying the interest). I then found another place and I hope to keep going with this strategy. Down side- I pay a variable rate that is higher than a refinance rate. Positive- I only have interest payments so my monthly payments are low so I have good cashflow.
Good luck! I am sure you will find success with either option.
Hey Antoinette! I personally like both strategies depending on what you are trying to do. They both can work great. I have personally used both. I will just briefly describe how I used both:
Refinance- I did this because I had equity in a duplex that was on a 15 year loan. I refinanced into a 30year and pulled out enough money to use as a down payment for my next. I did not have anywhere near what you have. Moving it into a 30 year allowed me to keep my monthly payment the same and still have access to the money. Win! My plan was to hold both investments for the long term so I wanted to lock in the lowest payment I could with a fixed rate.
HELOC- I used this strategy when my plan was to use the money more like a credit card than the previous strategy I described. I pulled the money out and bought a place then fixed it up and refinanced into longer term financing. At which time I paid back the HELOC (so I was not paying the interest). I then found another place and I hope to keep going with this strategy. Down side- I pay a variable rate that is higher than a refinance rate. Positive- I only have interest payments so my monthly payments are low so I have good cashflow.
Good luck! I am sure you will find success with either option.
Financial Advisor · Blaine, MN · Member since 2014 · 477 posts · 387 votes
7y
Either way will work. What you have to watch for is the Occupancy Clause in the mortgage (HELOC or refi). When you get a typical mortgage you are agreeing to stay there for at least a year...and if you don't intend on that is is mortgage fraud...which isn't advisable.
Lender · Chicago, IL · Member since 2016 · 189 posts · 153 votes
7y
A third strategy is to put all the debt not on your current residence but on the next home to be acquired and you can add all the rehab dollars into it as needed. This is called HomeStyle conventional investor mortgage. It requires a 15% down payment off sum of purchase price and rehab dollars needed, done as a 30 year term, no pre penalty if you want to fix& flip, uses projected future rent from the house as extra income to qualify. This way your own home is still on track to be paid off and there is no extra risk of adding a HELO or doing a larger refinance there. No chance of mortgage fraud since it is an Investor loan not an owner occupier loan. Happy to answer any questions.
Investor · Jacksonville Beach, FL | NYC | Tamarindo Costa Rica · Member since 2014 · 182 posts · 130 votes
7y
@Antoinette Munroe We've done both with success. HELOC is great if you intend to pay it down sooner than later - keep in mind that with a HELOC the interest will fluctuate over time (and jump a lot after the introductory period), and it can be called by the bank (ie: closed) at any time - it happened to us in 2009 after the last market bust and we had to scramble to get approved for another one by another bank.