Should I pay off my house.

5 Replies

Hi I have a a house that is worth about $ 400-450k. I have a heloc on my home for $185k and I still own $30k. Should I pay it off with cash and refinance from more money to invest in real estate.
Interest rate-4.25%

What types of re investments are you looking at, long term buy and hold or flips? Can you simply increase your HELOC to $250k or more?

Using equity in a home and leveraging that money at a cost of say 4.5% and putting it into a profit producing vehicle with a high yield is the essence of arbitrage and a great use of leverage if done wisely and not in a dice rolling investment.

My philosophy on the subject is that leverage is for growth, while free and clear is for safety. So, which do you value more at this time, growth or safety?

If you could pay off your mortgage and you have enough investment income from other sources to cover your expenses plus a reasonable margin (2x for me), then I would pay it off because you really don't need the growth. On the other hand, if with a paid off mortgage you would still need to work to cover your expenses, then you need the growth, so I would leverage it IF AND ONLY IF you can find another investment that you are confident could reliably cover the additional debt servicing plus margin even in a down market.

Thanks for the advise . I should able to get more than $250k . I have enough money to cover all expenses and the cash is just extra. I want to buy and hold for long term investment. I'm new to this but want to start focus on brrrr strategy or a way where I can keep the money going.

Assuming you have something lined up for the proceeds, refi, use % to pay off HELOC and invest the rest.

With 30 year money around 4% it's financially irresponsible not to (IMO)

So I should refinance the house first than take cash to pay for HELOC and used refinance money to invest? Fixed rate or variable? Thanks