Best way to extract equity

4 Replies

I currently own a fully paid off SFR that I am looking to take 70-80% of the equity out of to put as a down payment on a new property. Since there is no mortgage, is a cash out refinance better than a HELOC? A fixed rate 30 year seems better than the variable rate HELOC, but having the flexibility to decide on pulling less equity out as I go might be beneficial.

Compare the costs of each. The closing costs on a refinance will be much higher than the cost of a HELOC. As long as you are fine with the adjustable rate that comes with the HELOC that’s probably what I would go with.

@James Lockman It really depends on whether you plan to use the money all at once, or if you only need a little bit at a time. If the down payment that you need equals the entire 70% to 80% in value of your SFR, then I would go with the cash out refinance and get a fixed rate.

If you only need 20% of the equity for the down payment, can pay it off relatively quickly, and want the rest of the equity accessible for future use, go with the HELOC.