Investor · New York, NY · Member since 2020 · 3 posts · 1 vote
I'm considering getting a HELOC on my house ready for cash purchase/ BRRRR opportunities. But I wonder if I should also refinance the loan on that house to take advantage of the low-interest rate due to Covid-19.
Background info:
Original loan amount: $80K, 30yr-loan at 4.5% fixed, loan originated in 2014. I'm 6 years into paying the loan and right now it's halfway paid (~40k left). I'm expecting to pay it off within the next 3 years.
Would it be wise to refinance the loan or it's not worth doing it and keeping it as it is right now?
If I'm to refinance it, in which order should I be doing (refinance -> get Heloc, or get Heloc -> refinance)?
I wouldn't refi the mortgage unless you are doing a cash out refi. Without looking at an amortization schedule, I'd say it will cost you more than you'd save.
As an example, I just refinanced my primary down from 4.375 to 3.0 on $260K. It cost $2K in fees, but I will save that over 1 year. Save the headache, put that $2K into repayments.
@Darwin Do You're welcome; I'm surprised more didn't chime in.
Re reading your post, you're looking to get or use cash to invest I see and maybe I didn't give the answer you were looking for. I'm not familiar with HELOCs as such. If you have built up a lot of equity in your home, it would make sense to do a cash out refi. I'm guessing that interest rates for this would be 3.75 - 4% owing to the cash out part.
I made a big mistake within the last 12 months. I had $160K in hand and decided to pay off one of my rentals. What a great feeling that was....until I realized that money would have been good seed money for more properties. Ouch. So I ended up getting a commercial line of credit on that same house to the tune of $100K...I used $40K of that to help me buy a 4 plex...so now I'm down $120K in "opportunity cost". And it cost me $800 to close on that LOC. I wish I'd found BP at that time to seek guidance.