Real Estate Broker · Northeast PA · Member since 2017 · 2k+ posts · 2k+ votes
1y
That's a nice situation you're in, and I wouldn't touch the underlying 2.625% loan. Use either the HELOC or second mortgage for the $80K ONLY if you can get a fixed-rate loan.
It's difficult to predict the direction of medium—to long-term mortgage rates, (I feel we will be seeing more inflation over the next few years), so the fixed-rate mortgage is recommended.
Buffalo, NY · Member since 2018 · 790 posts · 530 votes
1y
It really depends on how quickly you think you can pay back the loan. I like the strategy, but the numbers don't look great to keep your current home as a rental. $80k as a HELOC interest only payments at 9% would add $600/month and a 20 year home equity loan at 7% would add over $600/month as well. Now you are over $2k and only bringing in $2100… If you don't care about the cash flow at the moment and have a good income that can support an unexpected large expense then you should be ok. And if you have that high income and don't mind chunking down a HELOC then that is the strategy I would probably take. Then when you hopefully get it paid off quickly you have it available again for unexpected expenses or another investment. Helocs really should only be used for short term though.