HELOC vs Cash Out Refinance on Primary Residence

[Jake S.]

My home is fully paid for and I'm looking to use the equity to purchase more properties.

Should I get a HELOC or just cash out refinance and lock in a lower rate?

HELOC is more flexible, but is interest only and doesnt allow for equity to be rebuilt.

From my calculations, the cash out would be only slightly more per month anyway

Thanks for the help!!!

[Michele B.]

Originally posted by @Jake S.:

@Wayne Bridenstine Thanks for the knowledgeable insight on this. I plan on using the HELOC/Refinance money to put down payments (or cash purchase) on a couple of more properties, so I was leaning more towards the Refinance because of the rate increase risk, but I definitely see the positives with the HELOC!!

@Michele B. Oh wow, didn't even consider the DTI. Would that be the same though if I just refinanced?

If you have room in your DTI you would be fine. If you mortgage yourself up to 50% then try for a new loan or a HELOC that is where you will be stopped.....but if you have the HELOC and its not being used as kind of a in case of emergencies then you will be okay if you find a great deal you could then use that money. SO what I guess I am saying is watch your DTI....Decide whether you want to have that line of credit available or if not. I personally would try to use it for the next purchase if you are comfortable with that decision.

Look at all sides of the coin. If the market down turns can you say no worries? Do you have enough to hold if you lose a renter or two and still hold the properties. I would hate to lose my home just because I overstepped. And remember if the market goes down they can take away your HELOC that you haven't used.

It's your decision and comes to what it worth to you.

Good Luck!