HELOC vs HELoan. Anyone have tips for using equity on a primary?

[Matthew Trevino]

Hi there

I have primary residence that I would like to access its equity to begin my first RE investment. I have came across HELOCs and HELoans but not sure which would benefit me best?

I am leaning towards the BRRRR method or traditional LR once the right property comes across.

I have researched both but still not sure which of those 2 would benefit me best or if it even matters.

Just would like tips on this topic if anyone has any?

Thanks

[Kerry Baird]

HELOC is best for short term money, because the interest rates are adjustable, while the second mortgage is a fixed rate for a period of time. I like them for an emergency fund, if I have over-runs with a renovation. I prefer this to using one for a down payment. Impossible to tell which would benefit you most.

I have found that lenders value the house in different ways; one is a full appraisal and the other is an automatic valuation…my credit union did a "drive by" valuation. Figure offers a quick HELOC, which we thought we'd get…but our DTI (debt to income) was too high. We also used PenFed for a HELOC, and that went well.

Tips: pull your own FICO score and call the local community banks and credit unions near you and ask what rates and terms they offer with a FICO like yours.  Make a table and compare, as interest rates and years of fixed vs variable rates will be all over the place.  Navy Federal has the longest draw and pay back period I have seen, whereas my local credit union has a very short draw/repayment period.  

Figure out what works best for your own situation.