Cash out Refinance vs HELOC

[Jonathan Deno]

Hey BP,

I'm having issues deciding on whether to Cash Out Refinance or take out a HELOC. Here is my situation:

I currently own and live in a five unit multi family. There is a good amount of Equity in the property. I am ready to purchase my first single family as my primary residence. My plan is to purchase a fixer upper with the equity I currently have in my multi family, while keeping the multi as a rental property. I read through the forum and came across this question plenty of times. But every scenario involved purchasing rental properties as opposed to purchasing a primary residence. Is there a difference or should I look at it in the same light?

Any information is much appreciated.

[Josh Gregory]

I have done both in the past, but I currently use a HELOC several times a year for short term, and pay it off in full each time. In my experience, the HELOC has a lot lower closing costs, but probably has higher (and most likely variable) interest rates. Given your scenario, it might make sense to take out a HELOC to buy your primary with cash, and then refinance the primary later at a lower interest rate and pay off the HELOC. Then, you'll already have the HELOC available for future "CASH" purchases.