HELOC or Refinance on an existing Property

2 Replies

Is there a reason to use one over the other? A regular broker I use, does not offer HELOC's only re-fis.

There is an income producing property that is for sale locally. A re-fi on an existing house would provide the money to purchase it free and clear. 

The issue does arise that a re-fi takes a while, and if I do a re-fi and this property sells then it is just wasted time/interest/money. However, if I put an offer and cash on the line and financing doesn't workout, that is wasted. 

I have also considered using a credit card to purchase the property and then paying it back with a re-fi. Concern here is obviously DTI being negatively impacted, and then being stuck with a huge credit card bill.

Any advice or thoughts?


I like the HELOC in most cases over the cash out refinance, as its a tool that can be used over and over again, versus a 1 time cash out refinance. So if you are investing and plan to do more, generally a HELOC is a good thing to have at that point. If you do need to take it down really quickly and you have the credit card that can do that, then consider it?

However once you have that much of a hit to a credit card, be prepared for your scores to drop a bit. What I would do is make application for the HELOC and have them pull your credit. If you need to close faster than the HELOC would close, just use the credit card to take it down. Because the lender already has your credit score before you use the card, just show on the app. that you are paying that credit card off or down with the HELOC. You already got the benefit of the higher score and you also took the property down very fast. Now you just need the debt transferred to the new HELOC, which can be done at closing.

Done and done!!!

Thanks Kevin. 

Beautiful idea. I guess it would be worthwhile to shop around for another lender to use for a heloc? Really hate to go outside of the good relationships I've already built, but guess it is what it is lol