HELOC vs HE Loan vs Cash-Out Refi
BP community!
Reaching out with a question about best options for financing.
Working to find a house-hack duplex in Austin, TX and planning to go conventional with 15% down. I am considering leveraging our primary home to do so. It is currently on a 15 year note and if I have about $45,000 in equity sitting in it. What are the pros and cons of each of the below three methods for accessing this?
1. Cash out Refinance:
PRO: Keeps everything together (HELOC and HEL create a 2nd lien)
CON: Starts a new loan, so has closing costs and you go back to the beginning of the amortization table, so more money to the bank.
2. HELOC
PRO: Low monthly payments. Avoid closing costs. Keep my current 1st loan on 15 year term chugging along.
CON: Might take a long time to pay it back and unless the duplex can later be refinanced at a higher value, it will be harder to put this money back.
3. HE Loan
PRO: Fixed term and interest rate. Avoid closing costs. Keep my current 1st loan on 15 year term chugging along.
CON: Creates a 2nd lien with a higher payment, so always risky if payment gets tough.
Open to your feedback.
Thanks!
Daniel