Investor · Chico, CA · Member since 2016 · 63 posts · 12 votes
Hi BP
I am stuck on a question. I have a rental property which is paid off and have equity. I am hoping to use that equity as a way to finance my deal. I am unable to decide if I should go for the line of credit or get a fixed loan for 30 years. Please advice....
Rental Property Investor · Gainesville, FL · Member since 2015 · 1k+ posts · 432 votes
10y
If you get a HELOC then you can use and reuse it as many times as you have it available. Mine is for 10 years, which they will renew afterward.
If you just refinance, I assume that's what you mean when you say "mortgage", then it's that one time to pull out money. There is no reusing the money.
Think of HELOC as a "credit card" that allows you to pull money out of and pay it back, pull money out of, pay it back.
Investor · Chico, CA · Member since 2016 · 63 posts · 12 votes
10y
Thanks for the input Daria B. and John Van Uytven. I was personally inclined towards HELOC, but interest rate is a little higher as the property is not owner occupied.
Guy with Great Hair · Austin, TX · Member since 2013 · 2k+ posts · 4k+ votes
10y
I would say get a fixed 30 for the mortgage for the investment property:
1. gives you stability in payments. Heloc's typically have payments based on the outstanding balance (1.5%) is common. This creates a large payment, and a changing payment
2. rates are LOW right now, lock them in! You can hedge the low rates now against 30 years of future economic unknowns. A heloc will have a variable interest rate, even if you get it now it may not always be useful to you
3. heloc's are harder to get against investment properties than they are against a primary.
Get a 30yr fixed for the investment property and if you have equity in the primary you put a heloc on that.