HELOC or Refi for down payment on next BRRR
Was going to do a HELOC on my primary for a down payment on my next BRRRR, then pay it back after I refi. I will use PML for 80% of purchase price and 100% of rehab
Discussing with lender on my primary who suggested a refi instead of HELOC because I have an FHA and paying $216 a month PMI, his thoughts refi to get rid on PMI, it would be a higher interest rate which would give me more of a deduction as I'll be paying more interest but he also suggested pulling out some of the equity to use for the rehab. Sounded good at first but after giving it some thought don't want to be paying the interest on money for the rehab for the next 30 years. Found a local credit union that offers 3.99% interest on HELOC for first 6 months and no closing fees if I keep a balance for 36 months. Will probably pay off the HELOC within a year pay the closing costs as they are about $1500.
Thoughts, suggestions? TIA
@Bob Anthes- you dont mention your present 1st mtg rate ? Assuming its low ( under 5% ) - you are likely better served using a HELOC for your needs and plans ....ask the credit union if you are allowed to payoff the HELOC to zero within the year and keep the HELOC in place ..this might allow you to avoid paying their closing costs ......I think they would charge these fees if the HELOC is being paid off and closed ..good luck
@Dave Skow thank you
Talk to your CPA you can only use interest paid on CASH OUT refinance if you use it to improve the same residence. Some portion of the interest might be deductible if used for investment but how will you segregate that portion for taxes. Lender gave foggy information.
Increasing the years, increasing the rate and increasing the loan might not be the best move just to remove PMI. If rates were same or lower it would be better.
HELOC's maximums cap at 18% or 22% depending on lender. Call Huntington Bank and get a HELOC quote from them to compare. They don't require a balance in an account. HELOC cost generally is appraisal or something like $500 not $1500
Thanks Caroline
Quote from @Bob Anthes:
Thanks Caroline
Welcome any time. If you need a better HELOC lender whistle. You need to segregate what you use from the HELOC interest to deduct it on the new rental as the mortgage bill will have home address. Keep good records for 2024 tax return
@Bob Anthes you know you can pay down the PMI ? Have you ran the numbers to see what that would cost you?
Hey Malcomb
No I didn't know you could pay down PMI. I'll look into that.
Thanks
Bob