Trying my hand at BRRRR long distance

[John Nocera]

So far, I'm reading Bigger Pockets publications and considering leveraging my house with a HELOC to get started. I feel like I'm on thin ice risking my home! I plan on being brave and looking for distressed property. Cash (sort of) to buy and rehab my first multi-family or single-family home.

[Jason Wray]

John,

I am going to offer some advice as a long time investor and Mortgage Banker. Do not take out a Heloc instead go for the Cash out refinance. You may a have a lower rate on the first mortgage if you have one but in 90% of the cases a cash out refinance is the better option.

For one it allows you to have one mortgage and avoid multiple liens on title and multiple trade lines on credit. In certain situations additional lien on credit and excessive trade lines can cause future DTI issues, lower scores and denials on future loans.

The rates our lower on mortgages versus Heloc right now and the terms are longer for example 30 year mortgage versus a 8-10 year Heloc and most carry prepayment penalties so if you want to pay it off early they can hit you with a prepay penalty of 6% or higher.

Refinance allows you to have cash in hand and avoid the scary "What if" factor meaning loss job, lost income, late payment, over leveraged and if any of these things happen your credit limit gets reduced and in most cases closed completely. Cash out refinance if something happen you just have cash in savings!

If you ever want to talk REI or have questions feel free to reach out I would be happy to help and show you examples to avoid lost time and money.