Cash or HELOC for Rental Balance?
Member since 2025 · 9 posts · 2 votes
Currently have an outstanding rental property balance of $40k, via 10-31 exchange (prior property paid off). I'm trying to decide on using accessible cash or taking out a HELOC on our primary home to payoff the rental.
HELOC would be a fixed rate of 6-7% on a 10-year term.
My thoughts...taking out the cash can potentially hinder future opportunities such as a house flip that I could use the cash on. The HELOC could be utilized more wisely in other potential investment situations.
Any other suggestions?
Hello Bradley,
I hope you're doing great. Taking out the HELOC does seem like it could be useful in order to pay off the rental or other investment opportunities, while still having the extra cash on the side in case of opportunities or emergencies. If you do proceed with the HELOC and pay off the rental, then you could be in essence swapping one loan for another, but could be at a better rate depending on how the interest rate is on the rental property compared to the HELOC's 6-7%. Using the HELOC to acquire a second property could help in growing your portfolio too.
If you have not considered already, I may also recommend looking into investing with Trusts and LLCs to have asset protection and/or anonymity with your personal residence and/or your investment properties.
Note: This information is for educational and informational purposes only and does not constitute legal, tax, financial, or investment advice. No attorney-client, fiduciary, or professional relationship is established through this communication.
@Ghassan Jabali I appreciate your reply. To clarify, the prior property in the 10-31 is fully paid off. The new investment property is higher in cost by $40k. I'm trying to be strategic in decisions as I'm trying to grown my investment portfolio. However, overthinking could get the best of me at time.
Do you already have a heloc, or are you going to apply for a new line for this reason?
If you have the heloc already established and feel comfortable that the lender will not call or cancel the line, then I would use the cash and keep the heloc undrawn. This prevents you from paying interest on the drawn amount while the cash sits idle. If you feel that you may lose the line (and access to the liquidity), then draw on the line for the payment and keep the cash liquid.
If youre going to get a new line just for this reason, it might be easier to just get a mortgage on the property for the needed amount.
@Patrick Roberts thanks for your reply. We have equity in our primary home but have not taken out a HELOC, so this would be a new line for addressing the balance. What are the chances a lender would call or cancel the line?
I don't see where we would loose the line. However, I do not see our family staying in our current home long term. When I talked to my realtor he had some hesitation on using the HELOC and it tying us to our current home.
@Patrick Roberts thanks for your reply. We have equity in our primary home but have not taken out a HELOC, so this would be a new line for addressing the balance. What are the chances a lender would call or cancel the line?
I don't see where we would loose the line. However, I do not see our family staying in our current home long term. When I talked to my realtor he had some hesitation on using the HELOC and it tying us to our current home.