My wife and I are looking at buying a second rental property. We opened a Heloc on our primary ($60k) and plan to use that for the down payment.
I have not spoken with lenders but from my prior experience I'm assuming we will have a min down payment of 15%.
We would likely do a one-time "draw" at around 6.5-7% interest on the Heloc for the down payment.
My question would be is it better to put 20% down and not pay PMI but pay 7% interest on that extra 5% down.
OR Better to put 15% down, Pay PMI, but amortize that 5% at ~4.5% interest over 30 years?
I would estimate our purchase price to be around $150-170k.
Heloc is not interest only, Partially amortized.
I would never agree to a loan that does not get rid of PMI after 80% LTV
Cash-out refi is not really an option in our market unless we find a diamond in the rough because the LTV is not worth the trouble.
You would have to work the numbers on both options. Interest and PMI is tax deductible so... make it simple on yourself. Who does your taxes?