What would you do with your HELOC?

[Will Pardo]

Hey all, I need advice. I have my variable interest only HELOC and pre-approval letter for $300k. My lender was trying to convince me to cash-refi my primary home and get rid of the HELOC. His advice was it’s better to have a fixed rate. I agree but I have the HELOC and don’t know if I should start over or keep trucking forward. With the current setup, I would have to put 25% down because my purchase would be an investment regardless if it’s a single family home or 4 or less multi unit property. Although, I would have instant equity and could cash-refi later on. I guess my question is what would you all do? Should I continue with the strategy above or buy a 4 or less multi-unit, house hack with a smaller down payment and cash-refi 6 months to a year down the road? Thanks!

[John Warren]

@Will Pardo I used a HELOC as a down payment on my first investment property in Lyons, IL. I was able to re-position the property (a four unit) and cash out refinance during month 7 of ownership. This allowed me to get most of my down payment back and set up a 30 year fixed rate mortgage on my investment. This type of strategy can work very, very well.

The thing I like about HELOCs is that you don't pay the interest until you use them. In addition, you don't pay much in closing costs, so you aren't churning money on the refinance process.