Should I do my HELOC at 100k at 6% or 75k at 4.5%

Question

Hi BP team,

My question is simply: Should I do my HELOC at 100k at 6% or 75k at 4.5%?  I have two credit unions that would give me either option but I need to decide today because the 100% at 100k (equity I have in my home) will change to 90% on Monday which is about 75k.

I assume the answer is more money is better because that is only about $100 a month more in carrying costs at 6% vs 4% for access to an extra 25k.

Of course your next question is, it depends on what your doing.  My plan to use BRRRR strategies mainly but my wife is getting her RE license now and wants to do 2-4 flips a year while I do 2-4 BRRRRS a year.  Long term goal is many rental properites.

I plan on mainly using my IRAs and HELOCS to fund deals until I have a track record then I want to raise money.

Thanks for any thoughts.

Brent Coombs · Answer

@Jeremy, are you saying that your home is valued at $100k, and the Credit Union/s will give you a 100% LTV?

At 6%?

Variable?

Interesting that you don't mind having zero equity left in your own home, and no allowance for a downturn.

While I agree that many/most of us on BP would always say "more money is better", in this case, I disagree!

I've read too many stories about folk who, because borrowed money came EASY, they SPENT it - too readily!

Seems to me that BECAUSE your plan is to act quickly, and often, that you'll become too tempted, too often!

Please accept that I am just suggesting that both of you be extra vigilant - with every borrowed dollar! My 2c...

Jeremy Karja · Answer

@Brent Coombs thanks for the advice and thoughts.  I agree.  It can be very risky.  I will be using IRA money and other money like that first.  I know I need to be very careful HELOCs and your home.