Conventional Cash Outs vs. HELoC

[Cassandra Sifford]

Hello Bigger Pockets family!!!  I have been researching ways to fund my 1st deal (still deciding between a flip or a buy and hold) and had been most interested in HELoC.  The value of my home has increased a good bit in the past 5 years and it looks like I could get a substantial amount.  I spoke to a gentleman yesterday in regards to doing a conventional cash out of my mortgage.  I had not considered it and don't know much about it.  Could anyone shine some light on the advantages and disadvantages of going with a cash out vs. a HELoC?

[Peter Tverdov]

I personally like doing a HELOC if I can (and I have been able to) Here is why:

-Cash out (yes you can repeatedly use the money if you keep rolling it into other properties that you also cash out) you increase your mortgage payment, which leaves your margin of error thinner.

-HELOC...you can pay interest only for 5 or 10 years, so in theory it's like a CC. You can use the balance as much as you want (which is what I plan on doing) while your mortgage payment stays the same.

-Believe HELOC closing rates are better also.

-Cash out refi is necessary when you have multiple properties and it gets harder to find HELOCs....or you have a REO, foreclosure, short sale that you bought under valued and you need to re-fi into a conventional mortgage.

Just my 2 cents and what works for me.