Cash-out Refinance vs HELOC at such low rates!

[Victor Hugo Acevedo]

Hello BP Family,

I am interested in hearing your thoughts (possibly even using as a recommendation) regarding the option of doing a cash-out refinance on my primary residence or refinancing and taking out a HELOC?

Since the rates are so low and I do have a bit of equity ( ~$100k) built in my primary residence, I want to tap into that equity to supplement my current savings set aside for buying up rental properties. I am just not sure which scenario would be best. Is it best to lock in a cash-out refinance for ~$40k at around 3.5% fixed for 30 yrs (quoted from 1 lender) or refinance to get a lower rate then then take out a HELOC for ~$40k which I can use anytime to buy up properties?

I know Cash is King and Cashflow is Queen, so that makes me want to go the Cash-Out refinance route, in case the market does turn and getting financing does become difficult. However, I do see the benefit and flexibility of taking out a HELOC and have access to that money when needed. But if the market does turn, wouldn't the prime rate go up and make the use of the HELOC unappealing?

Goals:
Start Buy and Hold portfolio of SFH's with good cashflow.

Looking to purchase properties that need slight work that I can add value to but maybe not ready to do a full BRRRR.

Already have enough cash to use as down payment for a few properties.

Want to find the best use of the equity in my primary residence to supplement my REI.

The reason why I only want to take out 40% of my equity is because at this rate, it will still cashflow nicely for me when I turn my primary residence into a rental in the near future :) 

tl;dr: Cash-Out Refi to lock in good rate vs Refi to lock down better rate and obtain a HELOC

Anybody else in a similar situation? Looking for any recommendations/suggestions. 

Thanks!

[Joseph Firmin]

Hi @Victor Hugo Acevedo, There may be a misunderstanding. You have 3 options there it seems, but the way you're talking about them is a little confusing. I hope this helps... You can take out a HELOC and it will be for a low rate and it acts like a credit card - you don't pay anything until you use it and it acts like cash. You could do a home loan, which is a loan taken out on the equity in your home, which you would start paying on immediately. You can refinance your home and once done, you'll immediately be paying a higher mortgage each month, but your cash will be freed up and no further payments due. You can use any of those, but I'd recommend the HELOC as it only costs you once you use it, but it is available and can be accessed quickly like cash.