Increasing cash flow using Equity Line of Credit

[Sean Elliott]

I'm in the process of acquiring a equity line of credit on my investment property. I am considering doing my own escrow and financing the entire property through the HELOC because the initial rate offer of 8.64% is high in my opinion. If I finance the entire property mortgage the bank is willing to drop the rate 1-3% depending on what it appraises for. Then I can chose to make interest only payments on the property for the 10yrs I have the HELOC for. I can then cash flow $150-200 more out of the property. Does anyone have any knowledge about this financing style for a investment property? What's the down side of doing interest only payments? Is there anything else I should be considering?

[Mike D'Arrigo]

@Sean ElliottLet me see if I'm understanding this. You would replace your $70K mortgage with a $110K HELOC at 5.64% to 7.64% that is adjustable? And you're only making an interest payment so you're not contributing to principal for 10 years? What is the interest rate on your current mortgage and is it 30 year fixed? I'll bet your current interest rate is much lower than what they are offering you on the HELOC. If the only way to make something cash flow is to use an interest only loan, than it is not a good deal in my opinion. That's 2006 all over again.