Home equity loan or cash out refinance

5 Replies

I am Looking to pull out the equity in my primary residence to buy and investment property, I was originally going to use the heloc I have on the house but I’m getting nervous about rising interest rates and want to lock it in at this low rate. The 30 year fixed rate home equity loan is a lot cheaper than the cash out refinance with the closing cost but I’m unsure if you can write off the interest and depreciation using the home equity loan. Any feedback would be greatly appreciated!!

-Gregg

Interest rates I believe are predicted to stay low for the next two years supposedly but I can understand wanting to have some piece of mind. I'm personally a fan of HELOCs since they are reusable. For your question for Home Equity interest being written off, IRS guidelines only allow for the interest of home equity loans to be written off when the money is used to "buy, build or renovate your home". This can also be for second homes so in the case you buy this second home and move into and renting out the first the interest would be deductible if I understand the guidelines correct but you should ask a CPA because in my former career I was an auditor, and not a tax accountant.

Hope this helps!

With a projected inflation rate of 5% just being announced and a government that seems to think printing free money is ok, I doubt you will see interest rates staying steady for 2 years.  However, how high will they go?  Who's to say. The reality is anything at or under 4% is still a really good rate compared to previous decades.  Right now, they are undulating back and forth little by little, trending slightly upward. 

Gregg, I do C/O and HELOC financing in Texas. I don't know your exact borrower profile, but I did just quote a C/O on a 20 YR Amortized with 65% LTV (they didn't want to pull up to the full 80%), 680 FICO at 2.875%. My HELOCs are in the mid to high 3's. Lots of factors go into C/O Refi pricing, but good rates are still out there.

Nick