How do I take Equity out?

[Wojciech Grajewski]

Hello,

I own a home on Long Island that is currently worth about $500,000. The house is fully paid for. I have about $48,000 in cash and would like to purchase my first investment property. Should I do a HELOC? Can I do a Cash-Refi? I do not want to do much if any renovations and with that said that houses are going for about $375,000 - $450,000. My Income is about $65K a year. What do you guys recommend I do? I would like to close within the next 6 months.

[Kerry Baird]

Rates just went up, and it is difficult to tell what the next steps will be.  Will the Fed cool or will they raise again?  I think history bears out that rates will go higher, as they have been much higher historically.  

In my own situation, a cash out refinance will be the way to go as I don't want to risk the variable rates of HELOCs for 30 years. If I want some cash out for a short period of time, say 3 years or so, a HELOC is the way to go. Most are fixed in the early years and then adjust after a period of time. Cash flow from both properties will be needed to pay off whatever financing you choose. Conversely, you could do a cash out at a reasonable loan to value of 65 to 70% of the value, and then top it off with a HELOC. Set the HELOC aside for future issues, concerns or property acquisitions.

Also, you don't say if you owner occupy the house.  If you do, the rates and amount you can take out are the best available in the marketplace.  If this is a rental and you have no rental property history, it will be higher rates and more difficult to accomplish.