What Heloc payment should I choose?

4 Replies

So I am maxing out a HELOC on my primary residence to purchase my second investment property, an 8 unit.

Here's my question: Should I take the interest only payments at %5? Or roughly double my monthly payment by making it principal and interest amortized over 15 years? 

Here's my situation. I plan to sell my primary residence in about 5 years. I also plan to purchase more investment properties within the next 5 years. 

Thanks

Interest only for maximum cash flow.  Just be thrifty with the cash.

If you sell your primary residence that the HELOC is secured to in 5 years, the HELOC will need to be paid off. Are you accounting for that? Or how do you plan to pay that off when you sell, especially if you max it out and are only making interest-only payments up until that point?

@Kyle J.

My plan was to just pay it off with the sale of the house. It's still a standard 80% LTV heloc so I'm not overleveraging in my opinion. By my math I would only pay off about $10,000 in principal under that schedule if I did principal and interest. I'm still deciding, I'd prefer to have the cash freed up.

Originally posted by @Chris Connery :

@Kyle J.

My plan was to just pay it off with the sale of the house. It's still a standard 80% LTV heloc so I'm not overleveraging in my opinion. By my math I would only pay off about $10,000 in principal under that schedule if I did principal and interest. I'm still deciding, I'd prefer to have the cash freed up.

As long as you've got a plan and are comfortable with the fact that you'll have to pay off the full balance if/when you sell, I'd opt for the interest only option. It'll free up more of your money AND keep your DTI ratio lower which could help if you need/want to obtain financing for any of the additional properties you plan on purchasing.

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here