HELOC: interest only or fully amoritized??

Question

I want to use a HELOC from my house that I own in San Diego for investing in Brrrr properties.

because I plan on pulling my investment out within a year after rehab and refinancing, it makes sense to me to have that HELOC be interest only to start. I don't plan on keeping the loan for very long and want to keep HELOC payments low. I understand that interest only usually comes with an adjustable rate, but I still think it would be better than paying principal AND interest.

is this correct thinking?

Matt Devincenzo · Answer

In my opinion yes.

I also have a HELOC on two properties here in SD, and I opted for the highest loan amount not the lowest interest or lowest payment. These are my short term funds, and are always paid back from whatever cash-out or sale they're tied to. So saving even a few hundred in interest each month isn't a big deal because the funds shouldn't be out for more than a year on any given deal. Saving say $300/mo interest for a year is only $3,600, but being able to have an additional $50K on the line that's available for contingencies or overages is priceless in comparison.

Arman Ahmed · Answer

@Matthew Kimmons

Your thinking makes total sense, especially if your BRRRR timeline is under a year. Using an interest-only HELOC can be a great way to keep your monthly outflow lower during the rehab and rental stabilization phase. I’ve used interest-only HELOCs myself to fund projects, and as long as you’re confident in the refinance exit or sale timeline, the flexibility and lower payments can be a big advantage.

That said, I’d just recommend running a couple of “what-if” scenarios — like delays in rehab, appraisals coming in lower than expected, or rate adjustments happening faster than you plan to exit — just so you’re fully covered.

Smart move leveraging your San Diego equity to grow your portfolio! Are you looking at investing locally or out-of-state for your BRRRR deals? I’m investing in Ohio where BRRRR is still doable with the right purchase price and team.

Joe Rutter · Answer

Hey Matthew,

Interest-Only is the way to go. Through the first year you do not pay off much of the principal anyway. Best to keep payment as low as possible. You can always overpay the minimum monthly payment and have your lender apply that to your principal if you decide to hold the loan longer.

Jaron Walling · Answer

@Matthew Kimmons Interest-only payments occur during the draw period. Meaning, you can choose to pay only the interest on the outstanding balance, rather than making payments that also reduce principal. However, this is usually a specific timeframe within the loan's lifespan.

Like you mentioned already a HELOC a "bridge" to get from point A (distressed property) to point B (renovated asset). The shorter you on the "bridge" the less it's costing you long term. You can't control the rates just like you can't control the economy/FED. Either way the risk and reward to there for investors that leverage a HELOC effectively.

Ideally you're buying property below market value, bringing some cash to the table, and combining it with HELOC funds. That way you're entirely in cash when you go to cash-out refinance paying off the loan. Most investors keep lines of credit open as long as they can. It's a rainy day, jump on a good deal, money.

Ty Coutts · Answer

Hey Matthew, great question—and welcome to the world of BRRRR investing!

You're thinking about this the right way. If your plan is to use a HELOC short-term (say, 6–12 months) to fund BRRRR deals and then cash yourself out with a refinance, an interest-only HELOC absolutely makes sense in most cases.

Here’s why:

• Lower monthly payments: Since you're not paying down principal during the rehab phase, your carrying costs stay minimal—especially helpful if the property isn't cash-flowing yet.
• Short-term use = less risk from adjustable rates: Most HELOCs have variable rates, but if you're repaying or refinancing out within a year, you're not as exposed to long-term rate hikes.
• Better cash flow = more flexibility: Lower payments free up cash for rehab, holding costs, or even your next deal.

Lower monthly payments: Since you're not paying down principal during the rehab phase, your carrying costs stay minimal—especially helpful if the property isn't cash-flowing yet.

Short-term use = less risk from adjustable rates: Most HELOCs have variable rates, but if you're repaying or refinancing out within a year, you're not as exposed to long-term rate hikes.

Better cash flow = more flexibility: Lower payments free up cash for rehab, holding costs, or even your next deal.

A few things to keep in mind:

• Make sure your draw period is long enough (typically 10 years), and check if there are any prepayment penalties or required repayment timelines.
• Have a solid refinance exit strategy—including appraisal comps, rehab timeline, and seasoning rules from your target lender.
• Watch for lender restrictions—some HELOCs can be frozen or reduced if the market dips or if your credit profile changes.

Make sure your draw period is long enough (typically 10 years), and check if there are any prepayment penalties or required repayment timelines.

Have a solid refinance exit strategy—including appraisal comps, rehab timeline, and seasoning rules from your target lender.

Watch for lender restrictions—some HELOCs can be frozen or reduced if the market dips or if your credit profile changes.

If this is your first BRRRR, consider stress-testing your numbers with a few extra months of holding just in case things go slower than expected (they often do on early projects!).

Happy to dive deeper if you want to talk about structuring your first deal or stacking multiple BRRRRs using your San Diego equity. You’re on a great track.

HELOC: interest only or fully amoritized??

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