Cash Out Refi vs. Home Equity Line of Credit

5 Replies

What would my fellow BPers use to get started off on their first BRRRR. Using a primary residence, would you cash out refi or use a home equity line of credit and why? What would the personal pros and cons be for both options?

@Kevin DeMaio i have used both. I did a cash out refinance AND a HELOC on my home in Riverside, IL when I went to buy my first deal. I personally prefer the HELOC as you don't pay interest on the money until you use it. In addition, it is interest only, so if you are in a tough spot it is not that hard to make the payments. The cash out refinance is something I do a lot on my pure investments. I have done conventional cash out refinances on my homes and my four unit, and I have also done commercial cash out refinances and even the Fannie Mae non recourse refinance (my favorite). You are putting permanent debt on with the cash out refinance, so you want to hold the property for a while to make it work.

I agree. HELOC is a no-brainer, because I don't think I paid a dime for mine (except maybe an appraisal fee or some trivial fee), whereas with a refi you have closing costs. Plus, the HELOC isn't costing you anything until you use it. I don't think I will ever get a refi if I can use a HELOC.

Originally posted by @John Warren :

@Kevin DeMaio i have used both. I did a cash out refinance AND a HELOC on my home in Riverside, IL when I went to buy my first deal. I personally prefer the HELOC as you don't pay interest on the money until you use it. In addition, it is interest only, so if you are in a tough spot it is not that hard to make the payments. The cash out refinance is something I do a lot on my pure investments. I have done conventional cash out refinances on my homes and my four unit, and I have also done commercial cash out refinances and even the Fannie Mae non recourse refinance (my favorite). You are putting permanent debt on with the cash out refinance, so you want to hold the property for a while to make it work.

Hi,

This is a great post. For a buy and hold, would you recommend doing a cash out refi and for a BRRRR would you recommend doing a HELOC?
 

@Jimmy Lieu for a straight buy and hold I would do the cash out refinance as you fix the rate for 30 years. The thing is, almost no one is actually a straight buy and hold investor, especially not once they have spent some time on BP!