Payoff line of credit?

Question

I took out a $60k line of credit from my house to fund my first deal but I only used about $30k. With interest rates being so low, I’m looking into refinancing my home and taking cash out to pay off the line of credit so I don’t have to worry about having a 2nd mortgage on my house. I was wondering it this is a good idea since I am just starting out and if I pay off the line of credit and close the account I wouldn’t have much funds to purchase my next deal. So should I pay off the line of credit or just keep it open and refi my 1st mortgage only?

Ian Salinas · Answer

@Bernadeau C. Flag star

Polo Vazquez · Answer

You could. But that also means you would have to pay a couple of grand in closing costs and you mortgage would start from 30 yrs again. You could do less, years 25 or 20. It might actually work out better for you doing less  years. Just keep in mind that you pay most of the interst at the begining of the mortgage. This is why banks want you to refinance over and over again. That way they keep your payment interst heavy all the time.I THINK you would be better off just being as frugal as possible and using all the money you saved to pay of the HELOC as fast as you can. This way when another oppurtunity comes by you have the full 60k at your disposal. Big emphasis on the think. I didn't actually run the numbers but that's what I would do. Unless of course your current mortgage has high interest rate and you were planning on refinancing anyway.Regards

Ian Salinas · Answer

@Paul Shannon thank you!

Ian Salinas · Answer

@Kerry Baird that’s good to know I will check with my refi lender.

Paul Shannon · Answer

Heloc is good for two things, one being able to access the capital to seize a deal.  Two,  flexibility.  The flexibility to access cash, but not pay interest on it if not used, in my option is priceless.  Its portfolio management and opportunity cost, but if you can build that into your overall strategy, very important.

Kerry Baird · Answer

Just food for thought: we had a HELOC on our primary and then later did a refinance. The refinance lender insisted upon paying off the HELOC. The point was that this lender needed to be in first position and the the line of credit in second position.So when the first gets paid off, the HELOC moves into first position. You’ll need your HELOC lender to agree to be subordinate to the new mortgage.

Bernadeau C. · Answer

@Ian Salinas what bank did you used for your HELOC?

Ian Salinas · Answer

@Cody Barna will do.

Cody Barna · Answer

@Ian Salinas awesome, let me know how it goes!

Ian Salinas · Answer

Thank you @Cody Barna

Yes I should have a decent amount of equity on the other property at least in my opinion. I am actually having it appraised today to refi and hopefully be able to pull my down payment and have it be my first BRRRR :)