Sitting on Cash, pay off Mortgage?

Question

Right now I have some cash sitting in savings. I had plans to invest it, crazy to think just last week I was putting in out of state offers, but I personally won't be doing any investing the next couple months amidst the uncertainty of covid19. I have 134K owed on my house. My thoughts are pay it off then do a heloc or REFI when I'm ready to deal hunt again. This would also help diversify my portfolio by not having too much cash sitting in a bank account, I do have concerns of a weakening dollar and inflation with this stimulus that is about to roll out.

Thoughts?

Kyle J. · Answer

@Thomas Grove  I wouldn't do that.  Some banks are already tightening up on their lending so having cash/liquidity will become even more important.  The last thing you'd want to do is sink all that cash into your property where it's harder to get to and costs you money (in terms of loan costs) to get back out.  And that's if you're even able to get it back out.  If I were you I'd just sit tight for right now and hold onto that cash.

Jay Hinrichs · Answer

A lot of younger investors are going to get schooled here shortly on how HELOCS really work  LOL..

George Pauley · Answer

A bird in the hand is worth two in the bush.  You have the cash in your hand right now.  If you give it to the mortgage company, you may not be able to get a bank to loan you money against the property in the future.  For example, if the economy tanks we may very well see deflation, particularly property value.  We don't know what's going to happen, but it is entirely possible we have another 2008 style scenario where property values are cut in half.  You won't be able to get that cash back out from a HELOC if that happens.Of course there are other considerations.  But if you are at all concerned about the current situation, you might want to hold on to the cash.

Suzanne Player · Answer

Until you're sure of your strategy, best to keep your options open.

Jay Hinrichs · Answer

Heloc would be far to risky those are the first instruments that are frozen.. unless you get one now and then ever green it right away. but then whats the point..

Evan Polaski · Answer

@Thomas Grove, the only issue I see is your cash being tied up and not able to access it during the time between payoff and HELOC.  As for the refi, I don't see any upside there, simply because you will have about 45 days for loan to close, and that could kill any potential offers, on top of not being able to show proof of funds, if you are offering cash.

The HELOC to me seems like your best bet, but again you are committed to not buying anything for the 30-45 days between you pay off and getting the refi closed.  And from that point, as you find deals, you can use your HELOC to buy in cash, and then refi the investment property to clear out all or most of your HELOC.  And if investments take 6 months or 3 years, you aren't paying much of anything.

For my HELOCs, Huntington did 80% LTV with absolutely no cost to me.  One has a $60/yr fee, the other doesn't have any fee because of a promotion they were running.

Sitting on Cash, pay off Mortgage?

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