Hello Everyone,

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.

Cash-out Refi
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 

HELOC
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.

HELOC:

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

Cash Out:

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.

Thernest