What's the advantages and disadvantages of Cash Out Refinance VS a Home equlity Line of credit ?
I'm going to list out advantages and disadvantages in a bullet format. I am assuming this will be on owner occupied as most people will find it difficult to get a HELOC on rental.
One monthly Payment
Generally a Higher rate than No cash-out but lower than a HELOC
Lump sum payout
up to 80% Loan to value
Higher variable rate than a Cash-out
Can get a new HELOC once the term expires
two monthly payments one for the first mortgage and one for the HELOC
Line of Credit that can be continuously used during term on HELOC, typically a 10 year draw and then a 20yr repayment period
up to 89.99% to 100% Combined loan to value
Both of these options have their pros and cons and depending on what it is you are wanting to do either could be a good option. Discussing your plans with a lender can help determine which option could be right for you.
Best of luck!
@Thernest Brown I’d recommend talking to your CPA first. Tax advantages/disadvantages will differ with either option.
Variable rate - Prime + Margin. Prime is low and you’ll most likely have your rate increase once Prime increases
Payment based on what you advance
Long draw period (typically 15yrs)
Typically only given on primary residences. HELOAN would be for NOO properties
Many no cost/no out of pocket programs out there
Typically there is a ballon payment after the draw period if you have not paid principal off
One payment. Fixed if you choose fixed rate program
Talk to CPA about any tax advantage
Your payment is based on the total loan you take out whether you use all the cash out or not.
Fully amortized payment
Thanks to all for the helpful information.