Cash Out Refi or Credit Union HELOC
Hey Team, I have a 2nd in PA with approximately $275K in equity. I am approved for a 80% LTV HELOC, rate moved from 4% to 4.75% on 7/1 and will continue to move with the fed. I am also approved for a 75% LTV cash out refi at 5.875%.
I intend to use the proceeds to invest these funds in the Charlotte market, likely 3 to 4 unit multi's. Not much difference in cash availability between the 2 products. Obvious rate stability in the cash out refi has me leaning that direction. Only reason I am considering the HELOC is the great rate, maintaining current 4.25% on 15 year conventional with 11 years left.
Please provide me perspective that I am overlooking or should be considering. What is the best way to compare these two options?
Target is to cash flow $15k monthly in the next 7 years.
Much appreciated,
Matt
What's the cap on the multi as well as the max adjustment per period @Matthew K.?
Also, you mentioned your target properties are in Charlotte, but what is the method of acquisition? On-market or do you plan to buy wholesale and renovate?
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I am buying MLS properties unless I get lucky and stumble on something off market. Nothing identified at this point. I am monitoring listings daily and networking, no targeted marketing currently underway. I am at the appraisal step on the 2nd home in PA which will essentially provide the funding for the NC investments.
Hey Matthew! Broadening your method of acquisition would be a great way to hit your cash flow projections. Have you considered increasing your exposure to off-market properties?
I also have a HELOC that was 3.75% and is 4.5% now. I am assuming it's only going to go higher but not sure how fast! I understand there are other cash out refi options like 7/1 and 10/1 arms with descent rates. I have a phone apt next week with BOA to find out more about the rates.
Hey Jack. You inquired around me looking off market in a post. I would like to look off market as well. Let me know what you are thinking.
Thanks,
Matt
An additional consideration is what the blended rate on your PA home woudl be with a refi, and compare that to the cost of the HELOC. For example if you currently owe 275K at 4.25% and you cash out 275K at 5.875% your real comparison is
550K*5.875% = (275K*4.25%) + ([email protected]%)
So you are better off with a Heloc at up to 7.5% compared to the cashout option. The other consideration is total fee amount for each option, and how often your rate can move.